Groupon Inc.

11/06/2025 | Press release | Distributed by Public on 11/06/2025 15:19

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our Condensed Consolidated Financial Statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under Part II, Item 1A, Risk Factors, and elsewhere in this Quarterly Report. See Part I, Forward-Looking Statements,for additional information.
Overview
Groupon is a global scaled two-sided marketplace that connects consumers to merchants. Consumers access our marketplace through our mobile applications and our websites. We operate in two segments, North America and International, and operate in three categories, Local, Goods and Travel. See Item 1, Note 14, Segment Information,for additional information.
Our strategy is to be the trusted marketplace where customers go to buy local services and experiences. We plan to grow our revenue by building long-term relationships with local merchants to strengthen our online selection and by enhancing the customer reach through experience curation and improved convenience in order to drive customer demand and purchase frequency.
We generate service revenue from Local, Goods and Travel categories. Revenue primarily represents the net commissions earned from selling goods or services on behalf of third-party merchants. Revenue is reported on a net basis as the purchase price collected from the customer less the portion of the purchase price that is payable to the third-party merchant. We also earn commissions when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications.
We are investing significant resources in making our platform more efficient, stable and agile. By improving our technology, our customer base can enjoy a modernized experience along with seamless execution of new product innovation, improved customer experience and customer satisfaction. Our platform migrations are strategic investments in our ability to innovate faster, serve merchants better, and create more engaging experiences for our customers.
We believe the next generation of local commerce will be driven by AI native experiences, for which AI agents will become an important discovery and transaction channel. We are building and beginning to implement modern API architecture, AI-ready search & relevance, AI-ready checkout in addition to internal AI tools to drive productivity and efficiency. We are investing now with the goal of Groupon being well positioned to be the partner of choice for local experiences as this channel scales, although we can provide no assurances that our efforts will be successful given the rapidly changing and complex AI environment.
How We Measure Our Business
We use several operating and financial metrics to assess the progress of our business and make strategic decisions. Certain of the financial metrics are reported in accordance with GAAP and certain of those metrics are considered non-GAAP financial measures. As our business evolves, we may make changes to the key financial and operating metrics that we use to measure our business. For further information and reconciliations to the most applicable financial measures under GAAP, refer to our discussion under the Non-GAAP Financial Measuressection.
Operating Metrics
•Gross billingsis the total dollar value of customer purchases of goods and services. Gross billings is presented net of customer refunds, order discounts and sales and related taxes. The substantial majority of our revenue transactions are comprised of sales of vouchers and similar transactions in which we collect the transaction price from the customer and remit a portion of the transaction price to the third-party merchant who will provide the related goods or services. For these transactions, gross billings differs from Revenue reported in our Condensed Consolidated Statements of Operations, which is presented net of the merchant's share of the transaction price. Gross billings is an indicator of our growth and business performance as it measures the dollar volume of transactions generated through our marketplaces. Tracking gross billings also allows us to monitor the percentage of gross billings that we are able to retain after payments to merchants.
•Unitsare the number of purchases during the reporting period, before refunds and cancellations, made either through one of our online marketplaces, a third-party marketplace, or directly with a merchant for which we earn a commission. We do not include purchases with retailers using digital coupons accessed through our websites or mobile applications in our units metric. We consider units to be an important indicator of the total volume of business conducted through our marketplaces.
•Active customersare unique user accounts that have made a purchase during the TTM either through one of our online marketplaces or directly with a merchant for which we earned a commission. We consider this metric to be an important indicator of our business performance as it helps us to understand how the number of customers actively purchasing our offerings is trending. Some customers could establish and make purchases from more than one account, so it is possible that our active customer metric may count certain customers more than once in a given period. We do not include consumers who solely make purchases with retailers using digital coupons accessed through our websites or mobile applications in our active customer metric, nor do we include consumers who solely make purchases of our inventory through third-party marketplaces with which we partner.
Our gross billings and units for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Gross billings $ 416,112 $ 373,392 $ 1,219,285 $ 1,128,145
Units 9,136 8,684 26,791 26,370
Our active customers for the trailing twelve months ended September 30, 2025 and 2024 were as follows (in thousands):
Trailing Twelve Months Ended September 30,
2025 2024
TTM active customers
16,126 15,455
Financial Metrics
•Revenue is earned through transactions for which we generate commissions by selling goods or services on behalf of third-party merchants. Revenue from those transactions is reported on a net basis as the purchase price collected from the customer for the offering less an agreed upon portion of the purchase price paid to the third-party merchant. Revenue also includes commissions we earn when customers make purchases with retailers using digital coupons accessed through our digital properties.
•Gross profitreflects the net margin we earn after deducting our Cost of revenue from our Revenue.
•Contribution Profit measures the amount of marketing investment needed to generate revenue and is defined as net revenues less cost of sales and marketing expense.
•Adjusted EBITDAis a non-GAAP financial measure that we define as Net income (loss) from continuing operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, and other special charges and credits, including items that are unusual in nature or infrequently occurring. For further information and a reconciliation to Net income (loss) from continuing operations, refer to our discussion under the Non-GAAP Financial Measuressection.
•Free cash flowis a non-GAAP liquidity measure that comprises net cash provided by (used in) operating activities from continuing operations less purchases of property and equipment and capitalized software. For further information and a reconciliation to Net cash provided by (used in) operating activities from continuing operations, refer to our discussion in the Liquidity and Capital Resourcessection.
The following table presents the above financial metrics for the three and nine months ended September 30, 2025 and 2024 (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Revenue $ 122,825 $ 114,479 $ 365,714 $ 362,178
Gross profit 111,836 102,895 332,560 326,119
Contribution profit
70,394 66,637 215,282 224,532
Adjusted EBITDA 17,540 14,767 48,429 50,763
Free cash flow (24,588) (19,666) (3,158) (22,660)
Operating Expenses
•Marketingexpense consists primarily of online marketing costs, such as search engine marketing, advertising on social networking sites and affiliate programs, and offline marketing costs, such as television. Additionally, compensation expense for marketing employees is classified within Marketing expense. We record these costs within Marketing on the Condensed Consolidated Statements of Operations when incurred. From time to time, we have offerings from well-known national merchants for customer acquisition and activation purposes, for which the amount we owe the merchant for each voucher sold exceeds the transaction price paid by the customer. Our gross billings from those transactions generate no revenue and our net cost (i.e., the excess of the amount owed to the merchant over the amount paid by the customer) is classified as marketing expense. We evaluate marketing expense as a percentage of gross profit because it gives us an indication of how well our marketing spend is driving gross profit performance.
•SG&A expenses include selling expenses such as sales commissions and other compensation expenses for sales representatives, as well as costs associated with supporting the sales function such as technology, telecommunications and travel. General and administrative expenses include compensation expense for employees involved in customer service, operations, technology and product development, as well as general corporate functions, such as finance, legal and human resources. Additional costs in general and administrative include depreciation and amortization, rent, professional fees, litigation costs, travel and entertainment, recruiting, maintenance, certain technology costs and other general corporate costs. We evaluate SG&A expense as a percentage of gross profit because it gives us an indication of our operating efficiency.
•Restructuring and related chargesrepresent severance and benefit costs for workforce reductions, impairments and other facilities-related costs and professional advisory fees. See Item 1, Note 10, Restructuring and Related Charges, for additional information about our restructuring plans.
Factors Affecting Our Performance
Attracting and retaining local merchants.As we focus on our local experiences marketplace, we depend on our ability to attract and retain merchants who are willing to offer their experiences on our platform. Merchants can withdraw their offerings from our marketplace at any time, and their willingness to continue offering services through our marketplace depends on the effectiveness of our marketplace offering. We are focused on improving our marketplace offering and merchant value proposition by exploring opportunities to better balance the needs of merchant partners, customers and Groupon.
Acquiring and retaining customers. To acquire and retain customers to drive higher volumes on our platform from new and existing customers, we are focused on strengthening our product offerings, improving the attractiveness of our offerings, and enhancing the performance of our marketing campaigns.
Impact of macroeconomic conditions. We have been, and may continue to be, impacted by adverse consequences of the macroeconomic environment, including but not limited to, inflationary pressures, the government shutdown, higher labor costs, tariff policy, labor shortages, supply chain challenges and changes in consumer and merchant behavior. In addition, recent and potential future changes to trade and tariff policies may introduce increased pricing volatility and overall uncertainty into our operations. To minimize the impact of macroeconomic conditions on our business, and to create value for our merchants and customers, we are focusing on building long-term relationships with local merchants to enhance our inventory selection, improving the customer experience through inventory curation and expanding convenience in order to drive customer demand and purchase frequency.
Results of Operations
North America
Operating Metrics
North America segment gross billings and units for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Gross billings
Local $ 293,761 $ 248,751 18.1 % $ 841,798 $ 723,391 16.4 %
Goods 7,645 11,234 (31.9) 24,646 39,703 (37.9)
Travel 17,701 15,078 17.4 63,940 63,870 0.1
Total gross billings $ 319,107 $ 275,063 16.0 $ 930,384 $ 826,964 12.5
Units
Local 5,942 5,376 10.5 % 17,327 15,787 9.8 %
Goods 199 379 (47.6) 696 1,439 (51.6)
Travel 69 61 13.8 247 256 (3.5)
Total units 6,210 5,816 6.8 18,270 17,482 4.5
North America TTM active customers for the trailing twelve months ended September 30, 2025 and 2024 were as follows (in thousands):
Trailing Twelve Months Ended September 30,
2025 2024 % Change
TTM active customers
10,999 10,158 8.3 %
Comparison of the Three Months Ended September 30, 2025 and 2024:
North America gross billings, units and TTM active customers increased by $44.0 million, 0.4 million and 0.8 million for the three months ended September 30, 2025 compared with the prior year period.Our Local Category experienced growth in gross billings driven by our transformation efforts. The Local category growth is offset by a de-emphasis on our Goods category evidenced by a decrease of our Goods active customers that resulted in fewer unit sales and lower gross billings year over year in the Goods category.
Comparison of the Nine Months Ended September 30, 2025 and 2024:
North America gross billings and units increased by $103.4 million and 0.8 million for the nine months ended September 30, 2025 compared with the prior year period. Our Local Category experienced growth in gross billings driven by our transformation efforts. The Local category growth is offset by a de-emphasis on our Goods category evidenced by a decrease of our Goods active customers that resulted in fewer unit sales and lower gross billings year over year in the Goods category.
Financial Metrics
North America segment revenue, cost of revenue and gross profit for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Revenue
Local $ 91,562 $ 81,479 12.4 % $ 271,990 $ 259,646 4.8 %
Goods 1,224 2,491 (50.9) 3,904 8,361 (53.3)
Travel 3,221 2,919 10.3 11,222 11,373 (1.3)
Total revenue $ 96,007 $ 86,889 10.5 $ 287,116 $ 279,380 2.8
Cost of revenue
Local $ 7,796 $ 8,453 (7.8) % $ 23,193 $ 25,535 (9.2) %
Goods 150 292 (48.6) 507 1,071 (52.7)
Travel 353 406 (13.1) 1,404 2,029 (30.8)
Total cost of revenue $ 8,299 $ 9,151 (9.3) $ 25,104 $ 28,635 (12.3)
Gross profit
Local $ 83,766 $ 73,026 14.7 % $ 248,797 $ 234,111 6.3 %
Goods 1,074 2,199 (51.2) 3,397 7,290 (53.4)
Travel 2,868 2,513 14.1 9,818 9,344 5.1
Total gross profit $ 87,708 $ 77,738 12.8 $ 262,012 $ 250,745 4.5
% of Consolidated revenue 78.2 % 75.9 % 78.5 % 77.1 %
% of Consolidated cost of revenue 75.5 79.0 75.7 79.4
% of Consolidated gross profit 78.4 75.6 78.8 76.9
Comparison of the Three Months Ended September 30, 2025 and 2024:
North America revenue and gross profit increased by $9.1 million and $10.0 million, while cost of revenue decreased by $0.9 million for the three months ended September 30, 2025 compared with the prior year period. Our Local revenue increased 12%,lagging the rate of growth in gross billings, as a result of lower deal margins and other factors, such as promotional discounts. The decrease in cost of revenue is primarily due to a decrease in amortization of internally-developed software relating to customer-facing applications. Gross profit increased due to an increase in revenue and decrease in cost of revenue.
Comparison of the Nine Months Ended September 30, 2025 and 2024:
North America revenue and gross profit increased by $7.7 million and $11.3 million, while cost of revenue decreased by $3.5 million for the nine months ended September 30, 2025 compared with the prior year period. Our Local revenue increasedby 5%, lagging the rate of growth in gross billings as a result of lower deal margins and other factors, such as promotional discounts. The decrease in cost of revenue is primarily due to a decrease in amortization of internally-developed software relating to customer-facing applications. Gross profit increased due to an increase in revenue and decrease in cost of revenue.
Marketing and Contribution Profit
North America marketing and contribution profit for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Marketing $ 31,746 $ 28,643 10.8 % $ 91,380 $ 79,902 14.4 %
% of Revenue
33.1 % 33.0 % 31.8 % 28.6 %
Contribution profit $ 55,962 $ 49,095 14.0 % $ 170,632 $ 170,843 (0.1) %
Comparison of the Three Months Ended September 30, 2025 and 2024:
North America marketing expense and marketing expense as a percentage of revenue increased for the three months ended September 30, 2025 compared with the prior year period, primarily driven by an increased investment in our performance marketing campaigns.
North America contribution profit increased for the three months ended September 30, 2025 compared with the prior year period, primarily due to optimization of our marketing investment.
Comparison of the Nine Months Ended September 30, 2025 and 2024:
North America marketing expense and marketing expense as a percentage of revenue increased for the nine months ended September 30, 2025 compared with the prior year period, primarily driven by an increased investment in our performance marketing campaigns.
North America contribution profit decreased for the nine months ended September 30, 2025 compared with the prior year period, primarily due to an increase in marketing expense.
International
Operating Metrics
International segment gross billings and units for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Gross billings
Local $ 77,270 $ 76,793 0.6 % $ 230,745 $ 234,758 (1.7) %
Goods 11,879 13,877 (14.4) 36,995 42,780 (13.5)
Travel 7,856 7,659 2.6 21,161 23,643 (10.5)
Total gross billings $ 97,005 $ 98,329 (1.3) $ 288,901 $ 301,181 (4.1)
Units
Local 2,605 2,475 5.2 % 7,501 7,622 (1.6) %
Goods 272 352 (22.7) 895 1,137 (21.3)
Travel 49 41 20.5 125 129 (3.1)
Total units 2,926 2,868 2.0 8,521 8,888 (4.1)
International TTM active customers for the trailing twelve months ended September 30, 2025 and 2024 were as follows (in thousands):
Trailing Twelve Months Ended September 30,
2025 2024 % Change
TTM active customers
5,127 5,297 (3.2) %
Comparison of the Three Months Ended September 30, 2025 and 2024:
International gross billings and TTM active customers decreased by $1.3 million and 0.2 million, while units increased by 0.1 million for the three months ended September 30, 2025 compared with the prior year period. The decline in the Local category was mainly due to the divestiture of Giftcloud. Excluding Giftcloud, International Local gross billings increased 15%, driven by our transformation efforts. The decline in our Goods category is primarily attributable to an overall decline in site traffic. In addition, there was a $4.7 million favorable impact on gross billings from year-over-year changes in foreign currency exchange rates, partially offsetting the decline in activity.
Comparison of the Nine Months Ended September 30, 2025 and 2024:
International gross billings and units decreased by $12.3 million and 0.4 million for nine months ended September 30, 2025 compared with the prior year period. The decline in the Local category was mainly due to the divestiture of Giftcloud, along with our withdrawal from the Italian market, to a lesser extent. Excluding Giftcloud and Italy, International Local gross billings increased 11%, driven by our transformation efforts. The decline in our Goods category is primarily attributable to an overall decline in site traffic. In addition, there was a $6.5 million favorable impact on gross billings from year-over-year changes in foreign currency exchange rates, partially offsetting the decline in activity.
Financial Metrics
International segment revenue, cost of revenue and gross profit for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Revenue
Local $ 23,182 $ 23,473 (1.2) % $ 67,796 $ 70,624 (4.0) %
Goods 2,175 2,734 (20.4) 6,700 7,448 (10.0)
Travel 1,461 1,383 5.6 4,102 4,726 (13.2)
Total revenue $ 26,818 $ 27,590 (2.8) $ 78,598 $ 82,798 (5.1)
Cost of revenue
Local $ 2,145 $ 1,859 15.4 % $ 6,388 $ 5,656 12.9 %
Goods 344 383 (10.2) 1,108 1,200 (7.7)
Travel 201 191 5.2 554 568 (2.5)
Total cost of revenue $ 2,690 $ 2,433 10.6 $ 8,050 $ 7,424 8.4
Gross profit
Local $ 21,037 $ 21,614 (2.7) % $ 61,408 $ 64,968 (5.5) %
Goods 1,831 2,351 (22.1) 5,592 6,248 (10.5)
Travel 1,260 1,192 5.7 3,548 4,158 (14.7)
Total gross profit $ 24,128 $ 25,157 (4.1) $ 70,548 $ 75,374 (6.4)
% of Consolidated revenue 21.8 % 24.1 % 21.5 % 22.9 %
% of Consolidated cost of revenue 24.5 21.0 24.3 20.6
% of Consolidated gross profit 21.6 24.4 21.2 23.1
Comparison of the Three Months Ended September 30, 2025 and 2024
International revenue and gross profit decreased by $0.8 million and $1.0 million, while cost of revenue increased $0.3 million for the three months ended September 30, 2025 compared with the prior year period. The decline in the Local category was mainly due to the divestiture of Giftcloud. Excluding Giftcloud, International Local revenue increased 8%. The decline in our Goods category is primarily attributable to an overall decline in site traffic. Revenue and gross profit also had favorable impacts of $1.3 million and $1.1 million from year-over-year changes in foreign currency exchange rates, partially offsetting the decline in activity.
Comparison of the Nine Months Ended September 30, 2025 and 2024:
International revenue and gross profit decreased by $4.2 million and $4.8 million, while cost of revenue increased by $0.6 million compared with the prior year period. The decline in the Local category was mainly due to the divestiture of Giftcloud, along with our withdrawal from the Italian market, to a lesser extent. Excluding Giftcloud and Italy, International Local revenue increased 5%. The decline in our Goods and Travel categories is primarily attributable to an overall decline in site traffic. Revenue and gross profit also had favorable impacts of $1.9 million and $1.7 million from year-over-year changes in foreign currency exchange rates, partially offsetting the decline in activity.
Marketing and Contribution Profit
International marketing and contribution profit for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Marketing $ 9,696 $ 7,615 27.3 % $ 25,898 $ 21,685 19.4 %
% of Revenue
36.2 % 27.6 % 32.9 % 26.2 %
Contribution profit $ 14,432 $ 17,542 (17.7) % $ 44,650 $ 53,689 (16.8) %
Comparison of the Three Months Ended September 30, 2025 and 2024:
International marketing expense and marketing expense as a percentage of revenue increased for the three months ended September 30, 2025 compared with the prior year period, primarily due to increased investment in our online marketing spend.
International contribution profit decreased for the three months ended September 30, 2025 compared with the prior year period,primarily due to increased investment in our online marketing spend paired with decreased revenue year over year.
Comparison of the Nine Months Ended September 30, 2025 and 2024:
International marketing expense and marketing expense as a percentage of gross profit increased for the nine months ended September 30, 2025 compared with the prior year period, primarily due to increased investment in our online marketing spend.
International contribution profit decreased for the nine months ended September 30, 2025 compared with the prior year period, primarily due to decreased revenue year over year paired with increased investment in our online marketing spend.
Consolidated Operating Expenses
Operating expenses for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
% Change 2025 2024 % Change
Marketing $ 41,442 $ 36,258 14.3 % $ 117,278 $ 101,587 15.4 %
Selling, general and administrative(1)
68,264 71,327 (4.3) 208,773 222,937 (6.4)
(Gain) on sale of assets
- - - - (5,160) (100.0)
(Gain) on sale of business
- - - (10,650) - 100.0
Restructuring and related charges (credits)
(64) 896 (107.1) 27 613 (95.6)
Total operating expenses $ 109,642 $ 108,481 1.1 $ 315,428 $ 319,977 (1.4)
% of Gross profit:
Marketing 37.1 % 35.2 % 35.3 % 31.2 %
Selling, general and administrative 61.0 % 69.3 % 62.8 % 68.4 %
(1)The three and nine months ended September 30, 2025includes $10.9 millionand $27.3 millionof stock-based compensation expense and $2.4 millionand $8.2 millionof depreciation and amortization expense. The three and nine months ended September 30, 2024includes $8.8 million and $17.5 million of stock-based compensation expense and $3.8 millionand $13.1 million of depreciation and amortization expense.
Comparison of the Three Months Ended September 30, 2025 and 2024:
SG&A and SG&A as a percentage of gross profit decreased for the three months ended September 30, 2025 compared with the prior year period, due to lower technology expenses from the usage of non-recurring indirect tax credits, partially offset by higher payroll costs.
Comparison of the Nine Months Ended September 30, 2025 and 2024:
SG&A and SG&A as a percentage of gross profit decreased for the nine months ended September 30, 2025 compared with the prior year period, due to lower technology expenses from the usage of non-recurring indirect tax credits, partially offset by higher payroll costs.SG&A includes $2.0 million related to liability-classified 2024 Executive PSUs during the nine months ended September 30, 2025.
Consolidated Other Income (Expense), Net
Other income (expense), net includes interest expense, interest income, loss on extinguishment of debt and foreign currency gains and losses, primarily resulting from intercompany balances with our subsidiaries that are denominated in foreign currencies.
Other income (expense), net for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Other income (expense), net $ (98,728) $ 22,429 $ (72,691) $ 5,264
Comparison of the Three Months Ended September 30, 2025 and 2024:
The change in Other income (expense), net for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024is primarily related to a loss on extinguishment of debt of $99.9 million. The loss on extinguishment of debt consists of the difference between the fair value of the 2030 Notes at issuance and the net carrying amount of the 2026 Notes and the 2027 Notes exchanged. Further, there was a$20.0 million decrease in net foreign currency gains (losses) which primarily resulted from U.S. dollar-denominated intercompany balances with our foreign subsidiaries. The decrease is primarily driven by the Euro appreciation against the U.S. dollar during the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
Comparison of the Nine Months Ended September 30, 2025 and 2024:
The change in Other income (expense), net for the nine months ended September 30, 2025 as compared with the prior year period is primarily related to a loss on extinguishment of debt of $99.9 million. The loss on extinguishment of debt consists of the difference between the fair value of the 2030 Notes at issuance and the net carrying amount of the 2026 Notes and the 2027 Notes exchanged.The loss was partially offset by a $26.6 million increase in net foreign currency gains (losses) which primarily resulted from U.S. dollar-denominated intercompany balances with our foreign subsidiaries. The increase is primarily driven by the Euro appreciation against the U.S. dollar during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
Consolidated Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Provision (benefit) for income taxes $ 21,248 $ 2,321 NM $ 33,603 $ 17,802 88.8 %
Effective tax rate (22.0) % 13.8 % (60.5) % 156.1 %
Comparison of the Three and Nine Months Ended September 30, 2025 and 2024:
The effective tax rates for the three and nine months ended September 30, 2025 and 2024 were impacted by the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets, including U.S. pre-tax losses in the third quarter of 2025 due to the loss on extinguishment of debt. For the three and nine months ended September 30, 2025 and 2024, we continue to maintain a full valuation allowance against all U.S. federal and state deferred tax assets. We expect that our consolidated effective tax rate in future periods may continue to differ significantly from the U.S. federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses.
See Item 1, Note 11, Income Taxes, for additional information relating to tax audits and assessments and regulatory and legal developments that may impact our business and results of operations in the future.
Non-GAAP Financial Measures
In addition to financial results reported in accordance with GAAP, we have provided the following non-GAAP financial measures: Adjusted EBITDA, free cash flow and foreign currency exchange rate neutral operating results. Those non-GAAP financial measures, which are presented on a continuing operations basis, are intended to aid investors in better understanding our current financial performance and prospects for the future as seen through the eyes of management. We believe that those non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define non-GAAP measures differently than we define them, even when similar terms are used to identify such measures). However, those non-GAAP financial measures are not intended to be a substitute for those reported in accordance with GAAP.
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP performance measure that we define as Net income (loss) from continuing operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation and other special charges and credits, including items that are unusual in nature or infrequently occurring. Our definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. Adjusted EBITDA is a key measure used by our management and Board to evaluate operating performance, generate future operating plans and make strategic decisions. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board. However, Adjusted EBITDA is not intended to be a substitute for Net income (loss) from continuing operations.
We exclude stock-based compensation expense and depreciation and amortization because they are primarily non-cash in nature and we believe that non-GAAP financial measures excluding those items provide meaningful supplemental information about our operating performance and liquidity. For the three and nine months ended September 30, 2025 and 2024, special charges and credits included charges related to our to our Italy Restructuring Plan, 2022 Restructuring Plan and 2020 Restructuring Plan, as well as gain on sale of assets, gain on sale of business and foreign VAT assessments. We exclude special charges and credits from Adjusted EBITDA because we believe that excluding those items provides meaningful supplemental information about our core operating performance and facilitates comparisons with our historical results.
The following is a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure, Net income (loss) from continuing operations, for the three and nine months ended September 30, 2025 and 2024 (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Income (loss) from continuing operations
$ (117,782) $ 14,522 $ (89,162) $ (6,396)
Adjustments:
Stock-based compensation (1)
11,109 8,890 27,585 17,682
Depreciation and amortization 4,301 6,895 14,335 24,512
Restructuring and related charges (credits)
(64) 896 27 613
(Gain) on sale of assets
- - - (5,160)
(Gain) on sale of business
- - (10,650) -
Foreign VAT assessments(2)
- 3,672 - 6,974
Other (income) expense, net (3)
98,728 (22,429) 72,691 (5,264)
Provision (benefit) for income taxes 21,248 2,321 33,603 17,802
Total adjustments 135,322 245 137,591 57,159
Adjusted EBITDA $ 17,540 $ 14,767 $ 48,429 $ 50,763
(1) Stock-based compensation excludes expense related to the liability-classified 2024 Executive PSUs. Refer to Item 1, Note 8, Stockholders' Equity (Deficit) and Compensation Arrangementsfor more information.
(2) The Foreign VAT assessments adjustment excludes related interest expense of $0.9 million for the three months ended September 30, 2024 and $1.7 million for the nine months ended September 30, 2024 as the interest expense is included within Other (income) expense, net. See Item 1, Note 7, Commitments and Contingencies, for additional information.
(3) Other (income) expense, net Includes $99.9 million related to the loss on extinguishment of debt of the 2026 Notes and 2027 Notes in connection with the issuance of the 2030 Notes during the three and nine months ended September 30, 2025. See Item 1, Note 6, Financing Arrangements, for additional information.
Free cash flow. Free cash flow is a non-GAAP liquidity measure that comprises Net cash provided by (used in) operating activities from continuing operations less purchases of property and equipment and capitalized software. We use free cash flow to conduct and evaluate our business because, although it is similar to Net cash provided by (used in) from continuing operations, we believe that it typically represents a more useful measure of cash flows because purchases of fixed assets, software developed for internal use and website development costs are necessary components of our ongoing operations. Free cash flow is not intended to represent the total increase or decrease in our cash balance for the applicable period.
Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. We believe it is important to view free cash flow as a complement to our Condensed Consolidated Statements of Cash Flows. For a reconciliation of free cash flow to the most comparable GAAP financial measure, see Liquidity and Capital Resourcesbelow.
Foreign currency exchange rate neutral operating results. Foreign currency exchange rate neutral operating results show current period operating results as if foreign currency exchange rates had remained the same as those in effect in the prior year period. Those measures are intended to facilitate comparisons to our historical performance.
The following tables represent the effect on our Condensed Consolidated Statements of Operations from changes in exchange rates versus the U.S. dollar for the three and nine months ended September 30, 2025 (in thousands):
Three Months Ended September 30, 2025
At Avg. Q3 2024 Rates (1)
Exchange Rate Effect (2)
As Reported
Gross billings $ 411,405 $ 4,707 $ 416,112
Revenue 121,540 1,285 122,825
Cost of revenue 10,844 145 10,989
Gross profit 110,696 1,140 111,836
Marketing 40,860 582 41,442
Selling, general and administrative 66,833 1,431 68,264
Restructuring and related charges
(61) (3) (64)
Income (loss) from continuing operations
3,064 (870) 2,194
Nine Months Ended September 30, 2025
At Avg. Q3 2024 Rates (1)
Exchange Rate Effect (2)
As Reported
Gross billings $ 1,212,817 $ 6,468 $ 1,219,285
Revenue 363,837 1,877 365,714
Cost of revenue 32,948 206 33,154
Gross profit 330,889 1,671 332,560
Marketing 116,503 775 117,278
Selling, general and administrative 207,110 1,663 208,773
(Gain) on sale of business
(10,176) (474) (10,650)
Restructuring and related charges
35 (8) 27
Income (loss) from continuing operations
17,415 (283) 17,132
(1) Represents the financial statement balances that would have resulted had exchange rates in the reporting period been the same as those in effect in the prior year period.
(2) Represents the increase or decrease in the reported amount resulting from changes in exchange rates from those in effect in the prior year period.
Liquidity and Capital Resources
Our principal source of liquidity is our cash balance totaling $238.5 million as of September 30, 2025. The Company's cash requirements are subject to change as business conditions warrant and opportunities arise. Additionally, with the closing of our Rights Offering in January 2024, termination of our Credit Agreement in February 2024, execution of the Exchange and Subscription Agreements in November 2024 and Exchange Agreement in July 2025, we believe that the Company has sufficient liquidity to support its overall ongoing operational needs within the next 12 months, including the repayment of the remaining outstanding $33.7 million principal of the 2026 Notes upon maturity in March 2026.
We are subject to claims for tax assessments by foreign jurisdictions, including two pending assessments in Italy, involving Groupon S.r.l., one of the Company's Italian subsidiaries. The first is the Italy 2012 Assessment for $134.9 million (€114.8 million), inclusive of estimated incremental interest from the original assessment. The second is the Italy 2017 Assessment for $35.1 million (€30.1 million).
On August 5, 2025, Groupon S.r.l. and the Italian Tax Authority reached an agreement in principle to resolve the Italy 2012 and 2017 Assessments. With respect to the Italy 2012 Assessment, the agreement provides that the Italian Tax Authority would reduce the Italy 2012 Assessment from $134.9 million (€114.8 million) to $20.5 million (€17.5 million), against which approximately $10.1 million (€8.6 million) would be credited from previous installment payments made by Groupon S.r.l. With respect to the Italy 2017 Assessment, the agreement provides that the Italian Tax Authority would reduce the Italy 2017 Assessment from $35.1 million (€30.1 million) to approximately $4.8 million (€4.1 million). As such, under the agreement, Groupon S.r.l. would be obligated to pay $4.8 million in cash for the Italy 2017 Assessment. Accordingly, under the terms of the agreement, the combined amount of cash that Groupon S.r.l. would be obligated to pay for both the Italy 2012 Assessment and the Italy 2017 Assessment is approximately $15.2 million (€13.0 million).
In October 2025, the Italian Tax Authority informed Groupon S.r.l., that the proposed agreement has been approved by the Administrative Review Committee, an Italian non-governmental oversight group, and the Central Directorate on Tax Audit for the Italian Internal Revenue Service.
Groupon S.r.l. expects to receive a revised version of the Italy 2012 Assessment from the Italian Tax Authority that reflects the terms of the agreement, at which time the parties will voluntarily dismiss all pending appeals. A hearing is scheduled on December 5, 2025, at which time the parties expect to jointly seek judicial approval of the settlement of the Italy 2017 Assessment. Once finalized, Groupon S.r.l. could be required to pay all settled amounts before the end of 2025. Until such time that the revised assessments have been issued and agreed to and the settlement of the Italy 2017 Assessment receives judicial approval, the proposed settlement agreement, in its entirety, remains non-binding on all parties. See Item 1, Note 11, Income Taxesfor additional information.
Our net cash flows from operating, investing and financing activities from continuing operations for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Cash provided by (used in):
Operating activities $ (20,506) $ (16,258) $ 7,891 $ (11,069)
Investing activities (3,024) (3,442) 4,000 (3,070)
Financing activities (3,275) (691) (6,413) 32,929
Our free cash flow for the three and nine months ended September 30, 2025 and 2024 and a reconciliation to the most comparable GAAP financial measure, Net cash provided by (used in) operating activities from continuing operations, for those periods were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net cash provided by (used in) operating activities from continuing operations
$ (20,506) $ (16,258) $ 7,891 $ (11,069)
Purchases of property and equipment and capitalized software from continuing operations
(4,082) (3,408) (11,049) (11,591)
Free cash flow $ (24,588) $ (19,666) $ (3,158) $ (22,660)
Our revenue-generating transactions are primarily structured such that we collect cash up-front from customers and pay third-party merchants at a later date, either based upon the customer's redemption of the related voucher or fixed payment terms, which are generally weekly, throughout the term of the merchant's offering.
Our cash balances fluctuate significantly throughout the year based on many variables, including changes in gross billings and the timing of payments to merchants and suppliers.
Net cash provided by (used in) operating activities
For the nine months ended September 30, 2025, our net cash provided by operating activities from continuing operations was $7.9 million as compared with net cash used in operating activities from continuing operations of $11.1 million in the prior period.The increase in operating cash flow for the current period is primarily attributed to the timing of merchant payments. Strategic supplier payments in late 2024 decreased merchant payable entering into 2025, resulting in a lower beginning merchant payable balance for the current period and improved cash flow over the comparable period. We resumed regular payment cycles during the nine months ended September 30, 2025. Further, we have seen increased revenue and billings growth year-over-year.
Net cash provided by (used in) investing activities
For the nine months ended September 30, 2025, our net cash provided by investing activities from continuing operations was $4.0 million as compared with net cash used in investing activities from continuing operations of $3.1 million in the prior period. The increase in investing cash flow for the current period is primarily attributed to the proceeds earned on the sale of Giftcloud, partially offset by the proceeds on the sale of intangibles in the prior period as well as a decrease in purchases of property and equipment and capitalized software.
Net cash provided by (used in) financing activities
For the nine months ended September 30, 2025, our net cash used in financing activities from continuing operations was $6.4 million as compared with net cash provided by financing activities from continuing operations of $32.9 million in the prior period. The year-over-year change from financing activities is primarily due to $79.6 million of proceeds received from the Rights Offering during the nine months ended September 30, 2024, partially offset by an increase of $42.8 million in payments of borrowings under our revolving credit facility also during the nine months ended September 30, 2024, and, to a lesser extent, an increase in taxes paid for net share settlements of stock-based compensation awards of $5.7 millionduring the nine months ended September 30, 2025compared with $1.5 millionin the prior year period.
Matters related to the Rights Offering and Credit Agreement
On January 22, 2024, we announced the closing of our $80.0 million fully backstopped Rights Offering for shares of our Common Stock. Pursuant to the terms of the Rights Offering, 7,079,646 shares of Common Stock were purchased at $11.30 per share, generating $80.0 million in gross proceeds to the Company.
On February 12, 2024, we prepaid the Payoff Amount to terminate all commitments to extend further credit under the Credit Agreement using a portion of our $80.0 million in proceeds received from the Rights Offering. The terms of the Rights Offering permit the Company to use the proceeds for general corporate
purposes, including the repayment of debt. We were not subject to any early termination penalties under the Credit Agreement. The payment of the Payoff Amount terminated our obligations under the Credit Agreement, except for ordinary and customary survival terms. In addition, we retained access to letters of credit, originally available under the Credit Agreement.
See Item 1, Note 6,Financing Arrangements,for additional information regarding the Credit Agreement and Item 1, Note 8, Stockholders' Equity (Deficit) and Compensation Arrangements,for additional information regarding the Rights Offering.
Matters related to the 2026 Notes, 2027 Notes and 2030 Notes
In 2021, we issued the 2026 Notes in the principal amount of $230.0 million.
The 2026 Notes bear interest at a rate of 1.125% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, with an annual effective interest rate of 1.83%.
On November 19, 2024, we issued $197.3 million aggregate principal amount of 2027 Notes. From the issuance, we (i) exchanged $176.3 million aggregate principal amount of the 2026 Notes and (ii) issued and sold to certain 2027 Notes Offering Participants $21.0 million additional principal amount of the 2027 Notes for gross cash proceeds of $20.0 million. We used the $20.0 million of the cash proceeds to offset the cash outflows associated with the debt issuance costs as well as general corporate purposes.
The 2027 Notes bear interest at a rate of 6.25% per annum, payable semi-annually March 15 and September 15 of each year, and will mature March 15, 2027, subject to earlier repurchase or conversion.
On July 2, 2025, the Company issued $244.1 millionaggregate principal amount of the 2030 Notes. consisting of (i) $20.0 millionaggregate principal amount of 2030 Notes issued in exchange for $20.0 millionaggregate principal amount of the Company's outstanding 2026 Notes and (ii) $224.1 millionaggregate principal amount of 2030 Notes issued in exchange for $150.0 millionaggregate principal amount of the Company's outstanding 2027 Notes with 2030 Notes Offering Participants.
The 2030 Notes are senior, unsecured obligations of the Company and accrue interest at a rate of 4.875% per annum, payable semi-annually in arrears on each June 30 and December 30, commencing December 30, 2025, and will mature on June 30, 2030, unless earlier converted, redeemed or repurchased.
See Item 1, Note 6,Financing Arrangements,for additional information regarding the 2026 Notes, 2027 Notes and 2030 Notes.
Other Liquidity and Capital Resource matters
As of September 30, 2025, we had $67.0 million in cash held by our international subsidiaries, which is primarily denominated in British Pounds Sterling, Euros, Indian Rupees and Australian dollars. In general, it is our practice and intention to re-invest the earnings of our non-U.S. subsidiaries in those operations or remit such earnings in a tax-efficient manner. We have not, nor do we currently anticipate the need to, repatriate funds to the U.S. to satisfy domestic liquidity needs arising in the ordinary course of business.
Contractual Obligations and Commitments
For information on our commitments for financing arrangements, see Item 1, Note 6, Financing Arrangements.
Our future lease payments and purchase obligations as of September 30, 2025 and through the date of this report, did not materially change from the amounts set forth in our 2024 Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2025.
Significant Accounting Policies and Critical Accounting Estimates
The preparation of Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenue and expenses, and related disclosure of contingent liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. Our significant accounting policies are discussed in Part II, Item 8, Note 2, Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition, refer to the critical accounting estimates under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operationsin our Annual Report on Form 10-K for the year ended December 31, 2024.
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