4Q13 Earnings February 2014
Forward-Looking Statements The statements contained in this presentation that refer to plans and expectations for the next quarter or the future are forward-looking statements that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The risks and uncertainties that could cause our results to differ materially from those included in the forward-looking statements include, but are not limited to, volatility in our revenue and operating results; risks related to our business strategy; responding to changes in the market; effectively dealing with challenges arising from our international operations; retaining existing customers and adding new customers; retaining existing merchant partners and adding new merchant partners; incurring expenses as we expand our business; competing against smaller competitors and competitors with more financial resources than us; maintaining favorable terms with our business partners; maintaining a strong brand; managing inventory and order fulfillment; integrating our technology platforms; managing refund risks; retaining our executive team; risk of cyber security breaches; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining our information technology infrastructure; protecting our intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant partner fraud; global economic uncertainty; compliance with rules and regulations associated with being a public company; and our ability to raise capital if necessary. We urge you to refer to the factors included under the headings Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations in the company s Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting the company s Investor Relations web site at http://investor.groupon.com or the SEC s web site at www.sec.gov. Groupon s actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance. You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon s expectations as of February 20, 2014. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this presentation to conform these statements to actual results or to changes in its expectations. Additional information relating to certain of our financial measures contained herein is available in our most recent earnings release and at our website at investor.groupon.com. 2
Mission: To be the world s commerce operating system, increasing consumer buying power while driving more business to merchants through price and discovery. 3
Areas of Focus Having evolved from one city to over one thousand, from a few customers to over 44 million, we are now focused on our next phase of evolution, building the world s largest marketplace of deals. There are four areas we re focused on to capitalize on this opportunity: Mobile Local Pull >70M local merchants worldwide,~31m in our core categories, we have only featured >650,000 to date (1) Localeze/Neustar& Factual.com Business Listings and Company Data 1 One Playbook 4
Mobile: leading the mobile commerce revolution Groupon s progress in mobile continues as mobile transaction mix worldwide reached nearly half in December 2013 Nearly 5 of global transactions were completed on mobile devices in December 2013, more than a 1 gain in just 90 days Approximately 9 million people worldwide downloaded our mobile apps in Q4 and nearly 70 million have downloaded them to date Mobile Transaction Mix Monthly, January 2011 to December 2013 (% of transactions) 10 8 6 4 October 11 April 11 March 13 October 12 April 12 September 13 December 13 June 13 January 11 July 11 January 12 July 12 January 13 North America Global 5
Pull: meeting customer demand by expanding beyond email ( Push ) to search ( Pull ) In December, roughly 8% of total traffic in North America searched, a 25% increase in the last quarter alone, albeit from a relatively small base; over that same period, customers that searched spent over 50 percent more than those that did not Direct email continued to decline as a percent of North America transactions in the fourth quarter Customers are starting to redeem Groupons faster, and fewer people are forgetting to use their Groupons; since the beginning of the year: Same day redemptions have doubled Unused Groupons per current month purchaser have declined nearly 3 Intl >140,000 active deals, on average, worldwide (~80,000 in NA) NA ~1,000 active deals worldwide IPO December 2013 6
One Playbook: Continued progress with NA playbook Rolling out processes/technology globally that have driven improvement in NA: Best business practices/processes Customer facing tools/technology to enhance the customer experience (eg. SmartDeals, Deal Bank) Proprietary sales tools to increase productivity (eg. Sales Workbench, Coffee, Deal Wizard, and Quantum Lead) Integration of underlying technology platforms EMEA Rest of World Billings increased 6% y/y to a record $566 million, in part due to acceleration of the Local business Revenue growth flipped to positive after five quarters in a row of declines, growing 43% to a record $251M Customer adds grew for second quarter in a row, after three sequential quarters of decline ROW y/y billings decline improved from 13% in 3Q13 to 11% in 4Q13 (2% excluding F/X) Growth rates hurt by reduced investment in unprofitable cities and sub-categories of deals roughly a year ago Accelerating focus on One Playbook in ROW; going one step further by regionalizing smaller markets to reduce SG&A 7
TMON and ideeli Acquisitions TMON A leading ecommerce site in Korea, one of the largest ecommerce markets in the world Shares the Groupon vision Truly mobile marketplace Heavily reliant on organic traffic Diverse product set across local, product, and travel Transaction closed early January for $100M cash and $163M Class A common stock ideeli One of largest independent fashion flash sites in North America focused on women s fashion apparel, accessories, and home décor Allows for expansion of presence in fashion category Transaction closed mid-january, for $43M cash Allows necessary scale, effectively doubling size of Rest of World business 8
Non Financial Metrics North America EMEA Rest of World Units 1 Unit Sales grew 11% YoY globally in 4Q13, to 56M, reflecting highest unit demand ever YoY by Segment +17% +9% ROW NA EMEA -1% Active Customers 2 (in millions) 41.0 35% 41.7 34% 42% 44% 42.6 33% 45% 43.5 32% 46% 4Q12 1Q13 2Q13 3Q13 44.9 23% 23% 22% 22% 22% 32% 46% 4Q13 Spend per Average Active Customer 3 Active Deals 4 Intl Customer Spend globally decreased $3 vs. 3Q13 to $134 152 151 156 155 150 139 146 137 135 137 126 116 108 102 95 >140,000 active deals, on average, worldwide at the end of the fourth quarter; ~80,000 in NA IPO NA December 2013 (1) Units reflect vouchers and products sold before cancellations and refunds. (2) Active customers reflect the total number of unique user accounts who have purchased a voucher or product during the trailing twelve months. (3) Spend per average active customer reflects the total gross billings generated in the trailing twelve months per average active customer over that period. (4) Active deals reflect the number of daily featured and Deal Bank deals offered on average at the end of the quarter. 9
Financial Summary Consolidated Quarterly Gross Billings & Revenue Operating Income (Loss) $1,520 $1,408 $1,414 $1,343 $1,593 +5% Y/Y $21 $27 $14 $13 $638 $601 $609 $595 $768 + Y/Y $(13) 4Q12 1Q13 2Q13 3Q13 4Q13 Gross Billings Revenue 10
Financial Summary Consolidated Annual Gross Billings & Revenue Operating Income (Loss) $200 $5,380 $5,757 $100 $99 $76 $3,986 +7% Y/Y $(1) $(100) $(200) $745 $2,574 $2,334 $1,610 $34 $15 $313 2009 2010 2011 2012 2013 +1 Y/Y $(300) $(400) $(500) $(420) $(233) 2009 2010 2011 2012 2013 Gross Billings Revenue 11
Expense Summary Consolidated Cost of Revenue Marketing % of Revenue 44% 37% 37% 4 51% 1 8% 9% 9% 7% $282 $222 $224 $235 $390 $61 $50 $55 $53 $XX $57 Selling, General & Administrative Stock Compensation and Acquisition-Related 48% 51% 5 49% 4 4% 5% 5% 4% 4% $308 $308 $308 $308 $303 $303 $294 $XXX $306 $294 $27 $30 $32 $25 $25 $XX $35 12
Financial Summary Segment North America EMEA Rest of World $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 Gross Billings & Revenue $719 $681 $712 $665 Gross Billings Revenue $789 +1 Y/Y +18% Y/Y $375 $340 $377 $361 $444 $900 $800 $700 $600 $500 $400 $300 $200 $100 Gross Billings & Revenue $532 $492 $482 $443 $566 $176 $184 $160 $148 $251 $500 +6% Y/Y + 3% ex F/X$400 +43%Y/Y $900 $800 $700 $600 $300 $200 $100 Gross Billings & Revenue $269 $234 $219 $234 $239 $87 $78 $72 $86 $73 Gross Billings Revenue Gross Billings Revenue -11% Y/Y -2% ex F/X -15%Y/Y $60 $50 $40 $30 $20 $10 Segment Operating Income & Margin Segment Operating Income & Margin Segment Operating Loss & Margin $17 5% $41 $49 12% 13% $25 $26 7% 6% 1 1 1 6 $60 5 $50 4 $40 3 $30 $20 1 $10 $9 5% $34 19% $5 $(5) 3 $(10) $(15) $(20) 1 $(25) $(30) $(12) -14% 4Q12 $(24) -31% $(14) - $(2) -2% $(15) - 1Q13 2Q13 3Q13 4Q13 (1) Represents segment revenue less cost of revenue and operating expenses, excluding stock-based compensation and acquisition-related expense (benefit), net, in absolute dollars and as a percentage of segment revenue. $25 15% $16 11% $37 15% 6 5 4 5 4 3 1-1 - -3-4 13
Financial Summary Category Gross Billings Gross Profit and Gross Margin 1 $1,520 52% $1,408 $1,414 59% 57% $1,343 54% $1,593 52% $450 $400 $350 $300 $356 $379 $385 $360 $378 9 8 7 6 $250 69% 74% 75% 74% 74% 5 $200 4 36% 28% 31% 33% 12% 13% 12% 13% 37% $150 $100 $50 27% 27% 27% 23% 24% 22% 16% 16% 11% 9% 1 9% 17% 17% 9% 9% 3 1 Local Goods Travel & Other Gross Margin % of Billings (1) Gross margin is defined as gross profit as a percent of gross billings in order to eliminate the differences in gross versus net presentation of revenue. 14 1
Financial Summary Local 1 $500 North America 6 $400 EMEA 8 $450 Rest of World 9 $450 $400 $350 $300 $250 $200 $150 $100 $50 $430 28% $119 $450 $450 32% $146 $154 $403 34% 34% $437 32% $138 $141 $350 5 $300 4 $250 3 $200 $150 $100 1 $50 $240 $259 37% 37% $241 41% $88 $97 $99 $207 39% $81 $277 38% $105 $400 7 $350 6 $300 5 $250 4 $200 3 $150 $100 1 $50 28% 33% 31% 37% 29% $129 $120 $115 $118 $116 8 7 6 5 4 3 1 $36 $39 $35 $44 $33 Billings Gross Profit Gross Margin % of Billings 2 (1) Local represents deals from local merchants, deals with national merchants, and through local events. (2) Gross margin is defined as gross profit as a percent of gross billings in order to eliminate the differences in gross versus net presentation of revenue. 15
Financial Summary Goods North America EMEA Rest of World $286 6 6 6 $275 $275 $275 $241 5 5 5 $225 $175 $165 $197 $195 $225 4 $175 $205 $149 $168 $170 $220 $225 4 $175 4 $125 3 $125 27% 3 $125 3 $75 $25 $(25) 14% 9% 11% 8% 7% $23 $12 $27 $22 $21 $75 1 $25 Billings Gross Profit Gross Margin % of Billings 1 (1) Gross margin is defined as gross profit as a percent of gross billings in order to eliminate the differences in gross versus net presentation of revenue. $(25) 19% 16% 17% 15% $38 $40 $27 $29 $34 $75 1 $25 $(25) $96 $89 18% $78 $72 $79 15% 12% 13% 9% $18 $7 $9 $12 $12 1 16
Financial Summary Travel and Other $95 North America 6 $95 EMEA 6 $95 Rest of World 6 $85 $85 $88 $84 $85 $75 $65 $66 $65 $68 $66 5 $75 $65 $74 $66 $69 5 $75 $65 5 4 4 4 $55 $55 $55 $48 $45 3 $45 3 $45 $44 3 $35 $25 22% 17% 18% $35 $25 21% 19% 21% $35 $25 15% $36 $32 19% 19% $37 22% $33 17% $15 $15 $15 $5 $10 $14 $13 $12 $12 1 $5 $17 $17 $14 $14 $15 1 $5 $7 $7 $6 $8 $6 1 $(5) $(5) $(5) Billings Gross Profit Gross Margin % of Billings 1 (1) Gross margin is defined as gross profit as a percent of gross billings in order to eliminate the differences in gross versus net presentation of revenue. 17
Financial Summary Cash Flow Operating Cash Flow Free Cash Flow 1 $200 $200 $178 $158 $150 $150 $100 $100 $66 $50 $43 $50 $26 $29 $9 $(12) $(6) $(27) $(50) $(50) 4Q12 1Q13 2Q13 3Q13 4Q13 4Q12 1Q13 2Q13 3Q13 4Q13 (1) Free cash flow is a non-gaap financial measure. See appendix for a reconciliation to the most comparable U.S. GAAP financial measure, Net cash provided by (used in) operating activities. 18
Other Financial Highlights ($ millions) 12/31/11 4Q 2013 FY 2013 GAAP Loss per Share $(0.12) $(0.14) EPS excluding stock-based compensation, acquisition-related benefit, net and $0.04 $0.11 1 impairment of investment in F-tuan Operating Cash Flow $178M $218M Operating Cash Flow TTM $218M $218M Free Cash Flow 2 $158M $155M 2 Free Cash Flow TTM $155M $155M Cash and Cash Equivalents $1,240M $1,240M Repurchased 3.7M shares in the fourth quarter, for an aggregate purchase price of $38M; Repurchased 4.4M shares in the full year, for aggregate purchase price of $47M $253 million remains available under existing share repurchase authorization (1) Diluted earnings per share excluding stock-based compensation, acquisition-related benefit, net and impairment of investment in F-tuanis a non-gaap financial measure. See appendix for a reconciliation to the most comparable U.S. GAAP financial measure, Diluted net loss per share. (2) Free cash flow is a non-gaap financial measure. See appendix for a reconciliation to the most comparable U.S. GAAP financial measure, Net cash provided by (used in) operating activities. 19
1Q14 Outlook (as of February 20, 2014) (in millions, except per share amounts) 1 ($ millions) 12/31/11 Revenue $710 to 760 Q1 Guidance 2 Adjusted EBITDA $20 to 40 EPS, excluding stock-based compensation, amortization of acquired intangibles and acquisition-related costs, net of tax $(0.04) to (0.02) Amortization of Acquired Intangibles ~$10 to 15 Q1 Key Assumptions Other Depreciation and Amortization ~$20 to 25 Income Taxes, excluding the tax effects of stock-based compensation, acquisition-related costs and amortization of acquired intangibles ~$25 to 30 Sharecount ~680 to 684 Q1 will reflect a contribution of roughly $50 million to Revenue, and an approximately $20 million negative impact to Adjusted EBITDA related to the recent TMON and ideeli acquisitions; in addition, in Q1, Groupon anticipates ~$25 million of additional investment in marketing and other growth initiatives to drive adoption of the marketplace (1) Reflects Groupon sexpectations as offebruary 20, 2014. Grouponundertakes no obligation to update publicly the forward-looking statements contained on this slide or in this presentation to conform such statements to actual results or to changes in its expectations. (2) Adjusted EBITDA is defined as net income or loss excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, and acquisition-related costs. 20
Appendix
Non-GAAP Reconciliation EPS excluding Stock-Based Compensation, Acquisition-Related Benefit, net and the impairment of a minority investment in China (in thousands, except share and per share amounts) The following is a reconciliation of diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and the impairment of a minority investment in China to the most comparable U.S. GAAP financial measure, Diluted net loss per share : Three Months Ended December 31, 2013 Year Ended December 31, 2013 Net loss attributable to common stockholders $(81,247) $(95,393) Stock-based compensation 32,239 121,462 Acquisition-related expense (benefit), net 2,265 (11) Impairment of investment in F-tuan 85,521 85,521 Income tax effect of adjustments (11,301) (38,504) Net income attributable to common stockholders, excluding stock-based compensation, acquisition-related expense (benefit), net and impairment of investment in F-tuan $27,447 $73,075 Diluted shares 668,046,073 663,910,194 Incremental diluted shares (1) 16,685,634 15,501,759 Adjusted diluted shares 684,731,707 679,411,953 Diluted net loss per share $(0.12) $(0.14) Impact of stock-based compensation, acquisition-related expense (benefit), net and impairment of investment in F-tuan and the related income tax effects Diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and impairment of investment in F-tuan 0.16 0.25 $0.04 $0.11 (1) Outstanding equity awards are not reflected in the diluted net loss per share calculation for the three months and year ended December 31, 2013 because the effect would be antidilutive. However, those awards have been reflected in the calculation of diluted earnings per share excluding stock-based compensation, acquisition-related expense (benefit), net and impairment of a minority investment in China for the three months and year ended December 31, 2013 because they have a dilutive effect on that calculation.
Non-GAAP Reconciliation Free Cash Flow (in thousands) The following is a reconciliation of free cash flow (TTM) to the most comparable U.S. GAAP financial measure, Net cash provided by operating activities (TTM) : 4Q13 Net cash provided by operating activities (TTM) $218,432 Purchases of property and equipment and capitalized software (TTM) (63,505) Free Cash Flow (TTM) $154,927 Net cash used in investing activities (TTM) $(96,315) Net cash used in financing activities (TTM) $(81,697) The following is a reconciliation of free cash flow to the most comparable U.S. GAAP financial measure, Net cash provided by (used in) operating activities : Net cash provided by (used in) operating activities $65,717 $8,760 $43,302 $(11,905) $178,275 Purchases of property and equipment and capitalized software (40,034) (14,468) (14,042) (15,064) (19,931) Free Cash Flow $25,683 $(5,708) $29,260 $(26,969) $158,344 Net cash used in investing activities $(52,753) $(30,679) $(15,862) $(26,444) $(23,330) Net cash used in financing activities $(6,495) $(9,342) $(7,941) $(8,970) $(55,444)