Groupon, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative figures are for Q1 2023. Unaudited results. Groupon operates a two-sided marketplace through North America and International segments, across Local, Goods and Travel categories.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $123.1 million | $121.6 million | +1.2% |
| Gross profit | $110.6 million | $104.7 million | +5.6% |
| Gross margin | 89.8% | 86.1% | +3.7 percentage points |
| Operating income (loss) | $7.4 million | $(30.6) million | Improved |
| Net loss attributable to Groupon | $(12.3) million | $(29.1) million | Loss narrowed |
| Diluted loss per share | $(0.33) | $(0.95) | Improved |
| Adjusted EBITDA (non-GAAP) | $19.5 million | $(4.9) million | Improved |
| Operating cash flow | $(10.1) million | $(76.3) million | Cash use reduced |
| Free cash flow (non-GAAP) | $(13.8) million | $(85.9) million | Cash use reduced |
Revenue is generally reported net of the merchant’s share. Gross billings declined 3.9% to $381.1 million, units fell 12.8% to 9.1 million, and trailing-twelve-month active customers declined 11.5% to 16.1 million. North America revenue rose 5.5% to $94.1 million, while International revenue fell 10.5% to $29.0 million.
Cash and cash equivalents were $158.7 million at quarter-end; cash, cash equivalents and restricted cash totaled $188.4 million. Current assets were $276.9 million and current liabilities $297.3 million. The company had no revolving-credit borrowings after repaying $42.8 million of principal and terminating access to further credit in February. Its 2026 convertible notes had $230.0 million principal outstanding, with a $226.9 million net carrying amount, and mature March 15, 2026.
Material changes and notable items
- Operating expenses fell 23.7% to $103.2 million. SG&A declined 26.9% to $74.3 million, primarily due to lower payroll costs; restructuring charges were $0.1 million versus $8.8 million.
- Marketing expense increased 15.9% to $28.8 million, reflecting greater investment in rebuilt performance marketing campaigns. North America marketing rose 42.3%; International marketing declined 26.4% amid lower traffic and online marketing spend.
- Other expense, net was $12.7 million, compared with $3.1 million of other income. The change was primarily driven by a $15.9 million year-over-year swing in foreign-currency gains and losses.
- The January rights offering generated $80.0 million gross proceeds through issuance of 7,079,646 shares at $11.30 per share; net proceeds were $79.6 million. The offering was fully backstopped by an entity affiliated with the interim CEO and a director. The proceeds funded, in part, repayment and termination of the revolving credit facility.
- Stockholders’ equity was $41.4 million at March 31, compared with a $40.3 million deficit at December 31, 2023, substantially reflecting the rights offering.
- In April, the company completed a sale of certain intangible-asset rights for $10.0 million, subject to license-back provisions. The assets were classified as held for sale at quarter-end.
Outlook, risks and contingencies
The filing provides no quantified revenue or earnings guidance. Management said the rights offering and debt repayment support sufficient liquidity for ongoing operational needs over the next 12 months. Its strategy is to strengthen local merchant relationships, curate inventory and improve customer convenience, with a focus on demand and purchase frequency.
- Italian tax matters: A subsidiary is contesting a $119.3 million assessment related primarily to 2011 transfer pricing; the company says it believes the assessment is without merit. After a payment-suspension request was denied in April, the subsidiary was required to post a bond of approximately $27.6 million immediately, with a further $52.2 million due by October 22, 2024 if the appeal is not resolved in its favor. A lien restricts outgoing payments from the subsidiary’s bank account. No liability was recorded for this assessment.
- The Italian subsidiary also received a separate proposed assessment of approximately $31.6 million related to a 2017 distribution. The company disputes it; no liability was recorded.
- Management cites demand weakness and exposure to inflation, consumer and merchant spending, foreign exchange, competition, merchant and customer retention, cybersecurity, and litigation and regulatory matters. International gross billings declined 16.9%; the filing attributes the decline to lower demand across categories.
- Disclosure controls and procedures were deemed ineffective at March 31, 2024 because a previously reported material weakness in internal control over financial reporting remained unremediated. Remediation work is continuing through 2024.
- Other disclosed contingencies include litigation and regulatory claims. Remaining indemnification liabilities from the Latin America disposition were $2.8 million; additional reasonably possible obligations were estimated at approximately $11.7 million.
Key facts for investors to verify
- Progress and cash requirements of the Italian tax appeals, bond postings, bank-account restrictions and separate proposed assessment.
- Whether positive Adjusted EBITDA translates into sustained operating cash generation, given negative operating and free cash flow in Q1.
- Trends in gross billings, units and active customers, particularly continued International declines and the response to increased North America marketing.
- Execution and testing of controls remediation, and the timing of any conclusion that the material weakness is resolved.
- Liquidity needs and obligations under the $230.0 million 2026 Notes, including the company’s ability to meet obligations if operating performance remains weak.