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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-02-18 · 267 added, 200 removed, 296 unchanged (61% of the section changed)

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Consumers access our marketplace through our mobile applications and our websites, primarily localized groupon.com sites in many countries.

W e operate in two segments:

North America and International.

For the year ended December 31, 2019 , we derived 61.2% of our revenue from our North America segment and 38.8% of our revenue from our International segment.

See Item 8, Note 20 , Segment Information for additional information.

Historically, we have operated in three categories:

We operate in two segments:

North America and International and in three categories:

Local, Goods and Travel.

In February 2020, following a comprehensive review of opportunities and strategic alternatives, we announced that we plan to exit the Goods category by the end of 2020 and focus on our local experiences marketplace, which we believe best positions us for long-term and sustained growth.

We generate product and service revenue from our current business operations.

We earn service revenue from transactions in which we earn commissions by selling goods or services on behalf of third-party merchants.

Those transactions generally involve a customer's purchase of a voucher through one of our online marketplaces that can be redeemed with a third-party merchant for goods or services (or for discounts on goods or services).

Service revenue from those transactions is reported on a net basis and equals the purchase price received from the customer for the voucher less an agreed upon portion of the purchase price paid to the merchant.

Service revenue also includes commissions that we earn when customers make purchases with retailers using digital coupons accessed through our digital properties and from voucherless merchant offerings.

We earn product revenue from direct sales of merchandise inventory through our Goods category.

Our product revenue from those transactions is the purchase price received from the customer.

Following our planned exit of the Goods category, which we expect to occur by the end of 2020, we will no longer generate product revenue or service revenue from goods offerings.

We currently anticipate that given our plan to exit the Goods category, its financial results will ultimately be presented as a discontinued operation in our consolidated financial statements.

See Item 8, Note 21, Segment Information for additional information.

Currently, we generate product and service revenue from the following business operations.

Service Revenue from Local, Travel, and Goods Categories:

Service revenue primarily represents the net commissions earned from selling goods or services on behalf of third-party merchants.

Service 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.

Product Revenue from Goods Category:

We generate product revenue from our sales of first-party Goods inventory, which are direct sales of merchandise inventory.

For product revenue transactions, we are the primary party responsible for providing the good to the customer, we have inventory risk and we have discretion in establishing prices.

As such, product revenue is reported on a gross basis as the purchase price received from the customer.

Product revenue, including associated shipping revenue, is recognized when title passes to the customer upon delivery of the product.

We have transitioned to a third-party marketplace in North America as of the end of 2020 and will begin to transition to a third-party marketplace in International in the second quarter 2021.

Following the International transition, we expect our Goods category to primarily generate revenue on a net basis within service revenue.

In 2020, the COVID-19 pandemic has led to significant disruption in our business.

See Strategy, Restructuring and Cost Reduction and Factors Affecting our Performance below, and Item 8, Note 3, COVID-19 Pandemic, for more information about the impacts of COVID-19 on our business.

In February 2020, we announced a strategic plan to focus on our local experiences marketplace, which included exiting our Goods category.

However, due to the significant disruption in our business due to the COVID-19 pandemic we continue to sell Goods on our platform.

In the third quarter 2020, we announced an updated strategy and plan to prioritize expanding our Local inventory and modernizing our marketplace by improving the merchant and customer experiences.

While both of these are important to building a successful marketplace, we believe the most critical of these is expanding Local inventory.

To validate our strategic priority of expanding Local inventory, early in the third quarter 2020 we launched a test in four markets in North America to determine if growing inventory would result in improved billings and units performance.

To grow Local supply, we focused on leveraging three types of inventory:

Deals with few restrictions, new, lower discount Offers, and Market Rate supply.

At the conclusion of our test in December 2020, we determined that we reached our test goals and we intend to scale elements of our inventory strategy more broadly throughout our marketplace in 2021.

We also intend to continue to make enhancements to the customer and merchant experiences in 2021.

Restructuring and Cost Reduction

During the year ended December 31, 2020 we took significant actions to improve our cash position and materially reduce our cost structure.

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.

The first phase of our restructuring actions included an overall reduction of approximately 1,200 positions globally and the exit or discontinuation of the use of certain leases and other assets by the end of 2020.

The majority of the first phase of workforce reductions and impairments of our right-of-use and other long-lived assets occurred during the second quarter 2020.

In the third quarter 2020, we initiated the second phase of our restructuring plan, which included additional workforce reductions and the exit of our operations in New Zealand and Japan.

We expect to incur total pre-tax charges of $75.0 million to $105.0 million in connection with our multi-phase restructuring plan through the end of 2021.

Once fully implemented, we expect our multi-phase restructuring plan to result in $225.0 million in annualized cost savings.

During the year ended December 31, 2020, we recorded $64.8 million in pre-tax charges in connection with our restructuring actions.

See Item 8, Note 16, Restructuring and Related Charges , for more information.

In addition to the actions described above, we took several steps to reduce costs, preserve cash in the near-term and improve liquidity, including, but not limited to:

furloughing staff;

continuing to sell Goods on our platform instead of quickly exiting the category;

reducing marketing expense by significantly shortening payback thresholds and delaying brand marketing investments;

transitioning merchants to redemption payment terms, instead of fixed payment terms;

implementing a hiring freeze;

eliminating broad-based merit increases for employees;

replacing cash compensation with equity compensation in 2020 for Board members;

and amending our Credit Agreement to, among other things, provide covenant relief through the first quarter of 2021.

See Liquidity and Capital Resources for further information.

How We Measure Our Business

We use several operating and financial metrics to assess the progress of our business and make decisions on where to allocate capital, time and technology investments.

We use several operating and financial metrics to assess the performance of our business and make decisions on where to allocate capital, time and technology investments.

Certain of the financial metrics are reported in accordance with U.S.

GAAP and certain of those metrics are considered non-GAAP financial measures.

generally accepted accounting principles ("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.

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For entities that we have acquired in a business combination, this metric includes active customers of the acquired entity, including customers who made purchases prior to the acquisition.

We do not include consumers who solely make purchases with retailers using digital coupons accessed through our websites and 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.

Gross billings and gross profit per active customer are the TTM gross billings and gross profit generated per active customer.

We use these metrics to evaluate trends in customer spend and in the average contribution to gross billings and gross profit on a per-customer basis.

We do not include consumers who solely make purchases

with retailers using digital coupons accessed through our websites and 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.

• Units are 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.

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We consider units to be an important indicator of the total volume of business conducted through our marketplaces.

Gross billings per unit are the TTM gross billings generated per unit.

We use this metric to evaluate trends in units and in the average contribution to gross billings on a per-unit basis.

Our gross billings, units and gross billings per unit for the years ended December 31, 2019 , 2018 and 2017 were as follows (in thousands, except gross billings per unit amounts):

Our gross billings, units and TTM active customers for the years ended December 31, 2020, 2019 and 2018 were as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Gross billings $ 2,619,058 $ 4,613,531 $ 5,202,814

Gross billings per unit

Our active customers, gross billings per active customer and gross profit per active customer for the years ended December 31, 2019 , 2018 and 2017 were as follows:

Year Ended December 31,

TTM Active customers (in thousands)

TTM Gross billings per active customer

TTM Gross profit per active customer

Units 99,219 150,879 172,305

TTM Active customers 29,577 43,620 48,159

Financial Metrics

Revenue is earned through product and service revenue transactions.

We earn service revenue from transactions in which we generate commissions by selling goods or services on behalf of third-party merchants, primarily through sales of vouchers and similar transactions in which we collect the transaction price from the customer and remit a portion of that transaction price to the third-party merchant who will provide the related goods or services.

We report service revenue from those transactions 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.

Service revenue also includes commissions we earn when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications.

We earn product revenue from direct sales of merchandise inventory in our Goods category and report product revenue on a gross basis as the purchase price received from the customer.

After we exit the Goods category, we will no longer generate product revenue or service revenue from goods offerings.

• Revenue is currently earned through product and service revenue transactions.

We earn service revenue from transactions in which we generate commissions by selling goods or services on behalf of third-party merchants.

Service 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.

Service revenue also includes commissions we earn when customers make purchases with retailers using digital coupons accessed through our digital properties.

We generate product revenue from our sales of first-party Goods inventory.

Our product revenue from these first-party transactions, which are direct sales of merchandise inventory, is the purchase price received from the customer.

We have transitioned to a third-party marketplace in North America as of the end of 2020 and will begin to transition in International in the second quarter 2021.

Following the International transition, we expect our Goods category to primarily generate revenue on a net basis within service revenue.

• Gross profit reflects the net margin we earn after deducting our cost of revenue from our revenue.

Due to the lack of comparability between product revenue, which is reported on a gross basis, and service revenue, which

primarily consists of transactions reported on a net basis, we believe that gross profit is an important measure for evaluating our performance.

Due to the lack of comparability between product revenue, which is reported on a gross basis, and service revenue, which primarily consists of transactions reported on a net basis, we believe that gross profit is an important measure for evaluating our performance.

• Adjusted EBITDA is 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, acquisition-related expense (benefit), net and other special charges and credits, including items that are unusual in nature or infrequently occurring.

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Year Ended December 31,

2020 2019 2018

Revenue $ 1,416,868 $ 2,218,915 $ 2,636,746

Gross profit 677,294 1,186,129 1,320,601

Adjusted EBITDA 49,739 227,248 269,807

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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.

Selling, general and administrative expenses ("SG&A") 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.

• Selling, general and administrative ("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.

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We evaluate SG&A expense as a percentage of gross profit because it gives us an indication of our operating efficiency.

Restructuring charges represent severance and benefit costs for workforce reductions, impairments of long-lived assets and other exit costs resulting from our restructuring activities.

See Item 8, Note 15 , Restructuring , for additional information.

• Restructuring and related charges represent severance and benefit costs for workforce reductions, impairments and other facilities-related costs and professional advisory fees.

See Item 8, Note 16, Restructuring and Related Charges , for information about our restructuring plan.

Factors Affecting Our Performance

Impact of COVID-19 .

During the COVID-19 pandemic, various government restrictions and changes in consumer behavior have had a negative impact on our business, which relies on customers' purchases of local experiences, including events and activities, beauty and wellness, travel and dining.

Recovery from the COVID-19 pandemic could be volatile and prolonged given the unprecedented and continuously evolving nature of the situation.

We continue to monitor the impact of COVID-19 on our business.

See Item 8, Note 3, COVID-19 Pandemic, for more information about the impacts of COVID-19 on our business and Item 1A, Risk Factors .

Attracting and retaining local merchants.

As we seek to build a more complete local experiences marketplace, we depend on our ability to attract and retain merchants who are willing to offer their experiences on our platform.

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 generally 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 marketing and promotional services.

Driving purchase frequency and retaining customers.

In order to drive purchase frequency and retain our customers, we must increase high-quality inventory density in core cities, continue to improve the customer experience on our websites and mobile applications, and launch innovative products that remove friction from the customer journey.

Since the widespread economic impacts of COVID-19 began in March 2020, we are prioritizing opportunities to help drive demand for our merchants and highlighting offers that customers can enjoy right now.

As we continue to navigate through the volatility of the COVID-19 recovery period, we intend to take a market-by-market approach to attracting and retaining local merchants.

Driving purchase frequency and re-engaging and retaining customers .

In light of significant declines in consumer demand for local and travel services due to COVID-19, we must highlight offers that customers can enjoy right now in order to drive purchase frequency and retain customers.

This includes surfacing the relevant Local inventory in each market depending on the government restrictions currently in place and continuing to leverage our Goods category in the near-term.

We must also continue to improve the customer experience on our websites and mobile applications, launch innovative products that remove friction from the customer journey and drive awareness to our supply, and grow our high-quality, bookable inventory.

Increasing traffic to our websites and mobile applications.

The traffic to our websites and mobile applications, including from consumers responding to our emails and search engine optimization ("SEO"), has declined in recent years.

As such, we must focus on developing sources of traffic in addition to email and SEO and optimizing the efficiency of our marketing spending, which is primarily guided by return on investment thresholds that are based on expected months-to-payback targets ranging from 12 to 18 months.

We also plan to relaunch our brand in 2020, and our new marketing strategy will take a full-funnel approach to drive top-of-mind awareness.

In addition to the factors outlined above, we believe that our plan to exit the Goods category by the end of 2020 presents three key challenges set forth below that could affect our performance:

Disruption caused by the planned Goods exit.

Aligning our global organization toward one vision may cause disruption that negatively impacts our team.

We must encourage our employees to focus on our core priorities and work to minimize disruption including decreased productivity, employee morale and retention.

Consultation and negotiation with international workers’ councils.

We must inform, negotiate and consult with our international workers’ councils on an exit plan for our Goods category, which may impact the timing, cost and execution of our planned exit in International.

Keeping our cross-shopping customers engaged on our platform.

As we shift more impressions toward our Local category, we intend to target our Goods-Local cross-shoppers with marketing efforts designed to retain these customers.

The traffic to our websites and mobile applications, including from consumers responding to our emails and search engine optimization ("SEO"), has declined in recent years, and we have experienced further declines in traffic due to the impacts of COVID-19.

As such, we must focus on improving the effectiveness of our emails, as well as developing sources of traffic in addition to email and SEO and optimizing the efficiency of our marketing spend.

Results of Operations

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Operating Metrics

North America segment gross billings, units and TTM active customers for the years ended December 31, 2019 , 2018 and 2017 were as follows (in thousands, except percentages and gross billings per unit):

Year Ended December 31,

North America segment gross billings, units and TTM active customers for the years ended December 31, 2020, 2019 and 2018 were as follows (in thousands, except percentages):

Year Ended December 31, % Change

2020 2019 2018 2020 vs 2019 2019 vs 2018

Gross billings

Service gross billings:

Local $ 1,038,542 $ 2,021,052 $ 2,161,192 (48.6) % (6.5) %

Goods 167,617 95,855 113,863 74.9 (15.8)

Travel 86,551 306,012 352,247 (71.7) (13.1)

Total service gross billings 1,292,710 2,422,919 2,627,302 (46.6) (7.8)

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Total gross billings $ 1,626,189 $ 2,986,613 $ 3,423,695 (45.6) (12.8)

Gross billings per unit

Local 36,896 64,976 74,533 (43.2) % (12.8) %

Goods 20,797 25,632 35,330 (18.9) (27.4)

Travel 676 1,514 1,567 (55.4) (3.4)

Total units 58,369 92,122 111,430 (36.6) (17.3)

TTM Active customers 17,494 26,505 30,579 (34.0) % (13.3) %

Comparison of the Years Ended December 31, 2020 and 2019:

North America active customers declined by 4.1 million for the year ended December 31, 2019 .

The decline is primarily attributable to a decline in traffic, including traffic from email and SEO, as well as our efforts to improve the efficiency of our marketing spend, which has led to a decrease in the number of active customers.

We expect the trend of declining active customers in our North America segment to continue in 2020 due to ongoing traffic declines and our plan to exit the Goods category by the end of 2020 .

The decline in active customers also impacted North America gross billings and units, which declined by $437.1 million and 19.3 million for the year ended December 31, 2019 .

The decrease in gross billings was partially offset by higher gross billings per unit due to a shift in mix of offerings sold.

For the year ended December 31, 2020 North America gross billings declined by $1,360.4 million, units declined by 33.8 million and TTM active customers declined by 9.0 million.

These declines were primarily due to the significant decrease in consumer demand due to changes in consumer behavior and actions taken by governments to control the spread of COVID-19, including quarantines, travel restrictions, as well as business restrictions and shutdowns.

Comparison of the Years Ended December 31, 2019 and 2018:

North America active customers declined by 2.1 million for the year ended December 31, 2018 , due primarily to a decline in traffic to our websites and mobile applications, as well as our efforts to improve the efficiency of our marketing spend.

The decrease in active customers adversely impacted North America gross billings and units, which declined by $504.0 million and 17.8 million for the year ended December 31, 2018 .

Gross billings were also impacted by the following:

our shift of customer impressions from traditional voucher offerings with food and drink merchants towards voucherless cash-back offerings;

our ongoing focus on optimizing for long-term gross profit generation rather than gross billings growth, which resulted in merchandising and product mix decisions that adversely impacted transaction volume and gross billings from our Goods category;

ceasing most of our food delivery operations in the third quarter 2017, which resulted in a $45.9 million decrease in Local gross billings;

a $25.5 million unfavorable impact on gross billings for the year ended December 31, 2018 as a result of adopting Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("Topic 606") as compared with previous accounting guidance.

For the year ended December 31, 2019, North America gross billings declined by $437.1 million, units declined by 19.3 million and active customers declined by 4.1 million.

These declines were primarily due to the decline in traffic, including traffic from email and SEO, as well as our efforts to improve the efficiency of our marketing spend, which led to a decrease in the number of active customers.

Financial Metrics

North America segment revenue, cost of revenue and gross profit for the years ended December 31, 2020, 2019 and 2018 were as follows (dollars in thousands):

Year Ended December 31,

Year Ended December 31, % Change

2020 2019 2018 2020 vs 2019 2019 vs 2018

Service revenue:

Local $ 432,183 $ 721,038 $ 752,863 (40.1) % (4.2) %

Goods 35,276 16,236 18,283 117.3 (11.2)

Travel 17,686 57,939 71,856 (69.5) (19.4)

Total service revenue 485,145 795,213 843,002 (39.0) (5.7)

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Service cost of revenue:

Local $ 53,143 $ 77,539 $ 81,511 (31.5) % (4.9) %

Goods 6,424 3,071 2,981 109.2 3.0

Travel 4,779 12,200 13,911 (60.8) (12.3)

Total service cost of revenue 64,346 92,810 98,403 (30.7) (5.7)

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Service gross profit:

Local $ 379,040 $ 643,499 $ 671,352 (41.1) % (4.1) %

Goods 28,852 13,165 15,302 119.2 (14.0)

Travel 12,907 45,739 57,945 (71.8) (21.1)

Total service gross profit 420,799 702,403 744,599 (40.1) (5.7)

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Service margin (1)

37.5 % 32.8 % 32.1 %

% of Consolidated revenue 57.8 % 61.2 % 62.2 %

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% of Consolidated gross profit 70.2 68.1 67.4

Represents the percentage of service gross billings that we retained after deducting the merchant's share from revenue.

(1) Represents the percentage of service gross billings that we retained after deducting the merchant's share.

Comparison of the Years Ended December 31, 2020 and 2019:

North America revenue and gross profit decreased by $540.3 million and $332.1 million, for the year ended December 31, 2020.

Those decreases were driven by a decline in gross billings and transaction volume due to fewer customers and lower customer traffic, including traffic from email and SEO, as discussed above.

The decrease in gross profit was partially offset by a $197.5 million decline in cost of revenue, which was primarily due to the decrease in transaction volume and gross billings, and higher gross profit per customer due to a shift in mix of offerings sold.

Those declines were primarily driven by a decline in gross billings and transaction volume due to the impacts of COVID-19.

Revenue also declined due to the ongoing transition of our Goods category to a third-party marketplace model.

In a third-party marketplace model, we generate service revenue which is presented on a net basis.

The increase in service margin was due to a shift in mix of offerings sold and higher variable consideration from unredeemed vouchers due to our shift towards payment on redemption terms in North America.

North America cost of revenue decreased by $208.2 million for the year ended December 31, 2020 primarily due to the decrease in transaction volume and gross billings and the impacts of the ongoing transition of our Goods category to a third-party marketplace model.

Comparison of the Years Ended December 31, 2019 and 2018:

North America revenue and gross profit decreased by $280.5 million and $82.9 million for the year ended December 31, 2019.

Those declines were primarily driven by a decline in transaction volume and gross billings, as discussed above.

The decline in gross profit was partially offset by a $2.4 million favorable impact to revenue as a result of adopting Topic 606, as well as a decrease in cost of revenue.

The decrease in cost of revenue was due to a decline in gross billings and transaction volume, our optimization of shipping and fulfillment costs and a $25.4 million favorable impact to cost of revenue as a result of adopting Topic 606.

Operating Expenses and Income (Loss) from Operations

North America segment operating expenses and income (loss) from operations for the years ended December 31, 2019 , 2018 and 2017 were as follows (dollars in thousands):

Year Ended December 31,

Operating expenses

Selling, general and administrative

Restructuring charges

Gain on sale of intangible assets

Total operating expenses

Income (loss) from operations

Those declines were primarily driven by a decline in transaction volume due to fewer customers and lower customer traffic, including traffic from email and SEO, as discussed above.

The decrease in gross profit was partially offset by a $197.5 million decline in cost of revenue, which was primarily due to the decrease in transaction volume and gross billings.

Marketing and Contribution Profit

We define contribution profit as gross profit less marketing expense.

North America contribution profit for the years ended December 31, 2020, 2019 and 2018 was as follows (dollars in thousands):

Year Ended December 31, % Change

2020 2019 2018 2020 vs 2019 2019 vs 2018

Marketing $ 96,039 $ 214,069 $ 273,787 (55.1) % (21.8) %

% of Gross Profit 20.2 % 26.5 % 30.7 %

Selling, general and administrative

Contribution Profit $ 379,592 $ 593,676 $ 616,897 (36.1) % (3.8) %

Comparison of the Years Ended December 31, 2020 and 2019:

North America marketing expense and marketing expense as a percentage of gross profit declined for the year ended December 31, 2019 as we leveraged improved marketing analytics to drive efficiency in our marketing spend and maximize the lifetime value of our customer base.

We also decreased our offline marketing spend during the year in anticipation of relaunching our brand in 2020 to better support our evolving marketplace.

The decrease in North America SG&A and SG&A as a percentage of gross profit for the year ended December 31, 2019 was primarily due to the following:

the absence of expense related to our patent litigation with IBM of $34.6 million recorded in 2018;

lower technology, facilities, and payroll-related expenses.

The improvement in our North America income (loss) from operations for the year ended December 31, 2019 was primarily attributable to decreases in SG&A and marketing expense of $68.9 million and $59.7 million , partially offset by an $82.9 million decrease in gross profit, as discussed above.

North America marketing expense and marketing expense as a percentage of gross profit declined for the year ended December 31, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19.

The decline in our North America contribution profit for the year ended December 31, 2020 was primarily attributable to a $332.1 million decrease in gross profit, as discussed above, partially offset by a $118.0 million decrease in marketing.

Comparison of the Years Ended December 31, 2019 and 2018:

North America marketing expense and marketing expense as a percentage of gross profit declined for the year ended December 31, 2019 as compared with the prior year as we leveraged improved marketing analytics to drive efficiency in our marketing spend and maximize the lifetime value of our customer base.

North America SG&A and SG&A as a percentage of gross profit declined for the year ended December 31, 2018 , primarily due to the following:

a $38.9 million decrease in compensation-related costs, including variable compensation;

decreases in facilities costs, systems costs, and other general expenses;

partially offset by

the expense related to our patent litigation with IBM of $34.6 million .

North America restructuring charges declined for the year ended December 31, 2018 .

See Item 8, Note 15 , Restructuring , for additional information.

The improvement in our North America income (loss) from operations for the year ended December 31, 2018 was attributable to decreases in SG&A, marketing expense and restructuring charges, partially offset by a decrease in gross profit and a decrease in gains from the sale of intangible assets.

See Item 8, Note 6 , Goodwill and Other Intangible Assets for additional information on our sale of customer lists and other intangible assets during 2017.

For the year ended December 31, 2018 , there was also a $27.0 million favorable impact on income (loss) from operations as a result of adopting Topic 606 as compared with previous accounting guidance.

The decline in our North America Contribution profit for the year ended December 31, 2019 was primarily attributable to a $82.9 million decrease in gross profit, as discussed above, partially offset by a $59.7 million decrease in marketing.

International

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International segment gross billings, units and TTM active customers for the years ended December 31, 2020, 2019 and 2018 were as follows (in thousands, except percentages and gross billings per unit):

Year Ended December 31,

Year Ended December 31, % Change

2020 2019 2018 2020 vs 2019 2019 vs 2018

Gross billings

Service gross billings:

Local $ 421,845 $ 855,820 $ 865,271 (50.7) % (1.1) %

Goods 61,860 51,663 71,492 19.7 (27.7)

Travel 69,428 190,571 207,490 (63.6) (8.2)

Total service gross billings 553,133 1,098,054 1,144,253 (49.6) (4.0)

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Total gross billings $ 992,869 $ 1,626,918 $ 1,779,119 (39.0) (8.6)

Gross billings per unit

Local 16,567 33,069 32,055 (49.9) % 3.2 %

Goods 23,685 24,269 27,300 (2.4) (11.1)

Travel 598 1,419 1,520 (57.9) (6.6)

Total units 40,850 58,757 60,875 (30.5) (3.5)

TTM Active customers 12,083 17,115 17,580 (29.4) % (2.6) %

Comparison of the Years Ended December 31, 2020 and 2019:

International gross billings, units and active customers decreased by $152.2 million , 2.1 million and 0.5 million for the year ended December 31, 2019 .

Those decreases were primarily due to weak consumer sentiment in Europe, especially in the United Kingdom, and intense competition in our Goods business.

The decline in gross billings was also attributable to an $83.1 million unfavorable impact from year-over-year changes in foreign currency rates.

We expect the trend of declining active customers in our International segment to continue in 2020, primarily a fter we exit the Goods category, which we expect to occur by the end of 2020 .

For the year ended December 31, 2020 International gross billings declined by $634.0 million, units declined by 17.9 million and active customers decreased by 5.0 million.

Those decreases were primarily due to the significant decrease in consumer demand due to changes in consumer behavior and actions taken by governments to control the spread of COVID-19, including quarantines, travel restrictions, as well as business restrictions and shutdowns.

The decline in gross billings was partially offset by a $11.9 million favorable impact from year-over-year changes in foreign currency exchange rates.

Comparison of the Years Ended December 31, 2019 and 2018:

International units increased by 1.2 million during the year ended December 31, 2018 primarily due to higher transaction volume from our customer acquisition.

The increase in customers favorably impacted International gross billings, which increased $61.0 million during the year ended December 31, 2018 .

That increase was also largely driven by a $55.0 million benefit from year-over-year changes in foreign currency rates, partially offset by the impact of pricing and promotional strategies on our International gross billings per unit.

For the year ended December 31, 2019 International gross billings declined by $152.2 million, units declined by 2.1 million and active customers decreased by 0.5 million.

Those decreases were primarily due to weak consumer sentiment in Europe, especially in the United Kingdom, and intense competition in our Goods business.

The decline in gross billings was also driven by an $83.1 million unfavorable impact from year-over-year changes in foreign currency exchange rates.

Financial Metrics

International segment revenue, cost of revenue and gross profit for the years ended December 31, 2020, 2019 and 2018 were as follows (dollars in thousands):

Year Ended December 31,

Year Ended December 31, % Change

2020 2019 2018 2020 vs 2019 2019 vs 2018

Service revenue:

Local $ 138,274 $ 287,611 $ 306,700 (51.9) % (6.2) %

Goods 11,757 9,441 14,602 24.5 (35.3)

Travel 8,477 34,092 41,183 (75.1) (17.2)

Total service revenue 158,508 331,144 362,485 (52.1) (8.6)

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Service cost of revenue:

Local $ 12,362 $ 17,945 $ 17,273 (31.1) % 3.9 %

Goods 1,261 932 1,350 35.3 (31.0)

Travel 1,327 2,775 3,051 (52.2) (9.0)

Total service cost of revenue 14,950 21,652 21,674 (31.0) (0.1)

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Service gross profit:

Local $ 125,912 $ 269,666 $ 289,427 (53.3) % (6.8) %

Goods 10,496 8,509 13,252 23.4 (35.8)

Travel 7,150 31,317 38,132 (77.2) (17.9)

Total service gross profit 143,558 309,492 340,811 (53.6) (9.2)

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Service margin (1)

28.7 % 30.2 % 31.7 %

% of Consolidated revenue 42.2 % 38.8 % 37.8 %

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International revenue and gross profit decreased by $261.8 million and $176.7 million for the year ended December 31, 2020.

Those decreases were primarily driven by a decline in gross billings as a result of weak consumer sentiment in Europe, especially in the United Kingdom, and intense competition in our Goods business, as well as unfavorable impacts on revenue and gross profit of $45.3 million and $19.3 million from year-over-year changes in foreign currency rates.

Those decreases were primarily driven by a decline in gross billings due to the impacts of COVID-19 as discussed above.

The decreases in revenue and gross profit were partially offset by favorable impacts of $9.5 million and $3.2 million from year-over-year changes in foreign currency exchange rates.

Cost of revenue decreased by $85.0 million for the year ended December 31, 2020 primarily due to the decrease in transaction volume and gross billings and a $6.3 million unfavorable impact from year-over-year changes in foreign currency exchange rates.

Comparison of the Years Ended December 31, 2019 and 2018:

International revenue and gross profit decreased by $137.3 million and $51.5 million for the year ended December 31, 2019.

The decrease in gross profit was also driven by a customer shift toward lower margin offerings.

The decline in gross profit was partially offset by a decrease in cost of revenue of $85.8 million , which was primarily due to the decline in gross billings, as discussed above, a shift in our Goods category mix from product revenue transactions, which are reported on a gross basis, toward service revenue transactions, which are reported on a net basis, and a $26.0 million favorable impact from year-over-year changes in foreign currency rates.

The decline in gross profit was partially offset by a decrease in cost of revenue of $85.8 million, which was primarily due to the decline in gross billings, as discussed above, a shift in our Goods category mix from product revenue transactions, which are reported on a gross basis, toward service revenue transactions, which are reported on a net basis, and a $26.0 million favorable impact from year-over-year changes in foreign currency exchange rates.

Marketing and Contribution Profit

International contribution profit for the years ended December 31, 2020, 2019 and 2018 were as follows (dollars in thousands):

Year Ended December 31, % Change

2020 2019 2018 2020 vs 2019 2019 vs 2018

Marketing $ 58,495 $ 125,286 $ 121,950 (53.3) % 2.7 %

% of Gross Profit 29.0 % 33.1 % 28.4 %

Contribution Profit $ 143,168 $ 253,098 $ 307,967 (43.4) % (17.8) %

Comparison of the Years Ended December 31, 2020 and 2019:

International revenue and gross profit increased by $67.6 million and $23.7 million for the year ended December 31, 2018 .

Those increases resulted from the following:

favorable impacts on revenue and gross profit of $33.1 million and $13.3 million from year-over-year changes in foreign currency rates;

higher transaction volume driven in part by our customer acquisition, as discussed above;

the expansion of our digital coupon offerings through our acquisition of Cloud Savings.

The increase in gross profit was partially offset by the impact of pricing and promotional strategies, as well as an increase in cost of revenue of $43.9 million for the year ended December 31, 2018 .

The increase in cost of revenue was due primarily to a shift in our Goods category mix from service revenue transactions, which are reported on a net basis, toward product revenue transactions, which are reported on a gross basis, and a $19.9 million unfavorable impact from year-over-year changes in foreign currency rates.

Operating Expenses and Income (Loss) from Operations

International segment operating expenses and income (loss) from operations for the years ended December 31, 2019 , 2018 and 2017 were as follows (dollars in thousands):

Year Ended December 31,

International marketing expense and marketing expense as a percentage of gross profit decreased for the year ended December 31, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19, partially offset by a $0.7 million unfavorable impact from year-over-year change in foreign currency exchange rates.

The decrease in international contribution profit for the year ended December 31, 2020 was primarily attributable to a $176.7 million decrease in gross profit, partially offset by a $66.8 million decrease in marketing.

Comparison of the Years Ended December 31, 2019 and 2018:

International marketing expense and marketing expense as a percentage of gross profit for the year ended December 31, 2019 increas ed as we continued to invest in the long-term potential of our International segment, partially offset by a $6.2 million favorable impact from year-over-year change in foreign currency exchange rates.

The decrease in our contribution profit for the year ended December 31, 2019 as compared with the prior year was primarily attributable to a $51.5 million decrease in Gross Profit.

Operating Expenses

Operating expenses for the years ended December 31, 2020, 2019 and 2018 were as follows (dollars in thousands):

Year Ended December 31, % Change

2020 2019 2018 2020 vs 2019 2019 vs 2018

Marketing $ 154,534 $ 339,355 $ 395,737 (54.5) % (14.2) %

Selling, general and administrative 603,185 806,945 870,961 (25.3) (7.4)

Restructuring charges

Goodwill impairment 109,486 — — — —

Long-lived asset impairment 22,351 — — — —

Restructuring and related charges 64,836 31 (136) NM (122.8)

Total Operating expenses $ 954,392 $ 1,146,331 $ 1,266,562 (16.7) (9.5)

Income (loss) from operations

% of Gross profit:

Marketing 22.8 % 28.6 % 30.0 %

Selling, general and administrative 89.1 % 68.0 % 66.0 %

Comparison of the Years ended December 31, 2020 and 2019:

International marketing expense and marketing expense as a percentage of gross profit increased for the year ended December 31, 2019 as we continued to invest in the long-term potential of our International segment.

That increase was partially offset by a $6.2 million favorable impact from year-over-year changes in foreign currency rates.

SG&A and SG&A as a percentage of gross profit increased for the year ended December 31, 2019 primarily due to increases in technology-related expenses, partially offset by lower payroll and facilities-related expenses and a $14.4 million favorable impact from year-over-year changes in foreign currency rates.

The decrease in International income (loss) from operations for the year ended December 31, 2019 was primarily attributable to a $51.5 million decrease in gross profit, as well as increases in SG&A and marketing expense, as discussed above.

Marketing expense and marketing expense as a percentage of gross profit declined for the year ended December 31, 2020 due to accelerated traffic declines, significantly shortened payback thresholds and lower investment in our offline marketing and brand spend in light of COVID-19.

SG&A decreased for the year ended December 31, 2020 primarily due to lower payroll-related expenses due to furloughs and restructuring actions.

SG&A as a percentage of gross profit increased for the year ended December 31, 2020 due to the decline in demand and traffic as a result of COVID-19.

During the first quarter 2020, we performed an interim quantitative impairment assessment of goodwill and long-lived assets as a result of significant deterioration in our financial performance due to the impact of COVID-19.

As a result, we recognized goodwill impairment of $109.5 million, that represented the excess of the EMEA reporting unit's carrying value over its fair value, and long-lived asset impairment of $22.4 million for the year ended December 31, 2020.

See Item 8, Note 3, COVID-19 Pandemic, for additional information about goodwill and long-lived asset impairments.

Restructuring and related charges increased for the year ended December 31, 2020 related to severance and benefit costs for workforce reductions, impairments and other facilities-related charges, and professional advisory fees resulting from our restructuring activities.

See Item 8, Note 16, Restructuring and Related Charges , for more information.

Comparison of the Years ended December 31, 2019 and 2018:

International marketing expense and marketing expense as a percentage of gross profit for the year ended December 31, 2018 increas ed as we continued to invest in the long-term potential of our International segment.

International SG&A increased for the year ended December 31, 2018 primarily due to an $8.7 million unfavorable impact from year-over-year changes in foreign currency rates.

International restructuring charges declined for the year ended December 31, 2018 .

See Item 8, Note 15 , Restructuring , for additional information.

The increase in our income from operations for the year ended December 31, 2018 as compared with the prior year was primarily attributable to an increase in gross profit and a decrease in restructuring costs, partially offset by an increase in marketing expense and SG&A, as discussed above.

For the year ended December 31, 2018 , there was a $2.7 million favorable impact on income (loss) from operations as a result of adopting Topic 606 as compared with previous accounting guidance.

Marketing expense and marketing expense as a percentage of gross profit for the year ended December 31, 2019 decreased as we leveraged marketing analytics to drive efficiency in our marketing spend and maximize the lifetime value of our customer base and decreased our offline marketing spend during the year.

SG&A decreased for the year ended December 31, 2019 primarily due to the absence of expense related to our patent litigation with IBM of $34.6 million recorded in 2018, lower facilities and payroll-related expenses and a $16.6 million favorable impact from year-over-year changes in foreign currency exchange rates.

Other Income (Expense), Net

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Year Ended December 31,

2020 2019 2018

Interest income $ 6,351 $ 7,744 $ 6,420

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Changes in fair value of investments (1,405) (72,497) (9,064)

Gain on sale of investment

Foreign currency gains (losses), net 17,919 (5,960) (20,325)

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Upward adjustment for observable price changes of investment — 51,397 —

Other 43 (459) 2,026

Other income (expense), net $ (16,968) $ (53,329) $ (53,008)

Comparison of the Years Ended December 31, 2020, 2019, and 2018:

The change in Other income (expense), net for the year ended December 31, 2019 as compared with the prior year is primarily related to a $69.4 million loss from changes in fair value of our investment in Monster LP, partially offset by an unrealized gain of $51.4 million as a result of an upward adjustment for observable price changes on an other equity investment.

The change in Other income (expense), net for the year ended December 31, 2020 as compared with the prior year is primarily related to a $71.1 million decrease in losses from changes in fair value of investments, and a $23.9 million increase in foreign currency gains (losses), net, partially offset by a decrease in unrealized gain of $51.4 million as a result of an upward adjustment for observable price changes on an other equity investment.

The change in O ther income (expense), net for the year ended December 31, 2019 as compared with the prior year was primarily related to $69.4 million loss from changes in fair value of our investment in Monster LP, partially offset by an unrealized gain of $51.4 million as a result of an upward adjustment for observable price changes on an other equity investment.

See Item 8, Note 8, Investments, for additional information.

The change in Other income (expense) was also partially offset by a $14.4 million decrease in foreign currency losses for the year ended December 31, 2019.

Foreign currency gains (losses) primarily result from intercompany balances with our subsidiaries that are denominated in foreign currencies.

The change in O ther income (expense), net for the year ended December 31, 2018 as compared with the prior year was primarily related to $20.3 million in foreign currency losses for the year ended December 31, 2018 , as compared with $18.6 million in foreign currency gains for the year ended December 31, 2017 .

The change in Other income (expense) was partially offset by a $14.4 million decrease in foreign currency losses for the year ended December 31, 2019.

Foreign currency gains (losses) primarily result from intercompany balances with our subsidiaries that are denominated in foreign currencies.

Foreign currency losses for the year ended December 31, 2018 were driven by the depreciation of the Euro against the U.S.

dollar from December 31, 2017 to December 31, 2018 .

Provision (Benefit) for Income Taxes

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Provision (benefit) for income taxes for the years ended December 31, 2020, 2019 and 2018 was as follows (dollars in thousands):

Year Ended December 31,

Year Ended December 31, % Change

2020 2019 2018 2020 vs 2019 2019 vs 2018

Provision (benefit) for income taxes $ (7,504) $ 761 $ (957) 1,086.1 % 179.5 %

Effective tax rate 2.6 % (5.6) % (92.8) %

Federal income tax rate was 21% for the years ended December 31, 2019 and 2018 and 35% for the year ended December 31, 2017 .

Federal income tax rate was 21% for the years ended December 31, 2020, 2019 and 2018.

The primary factor impacting the effective tax rate for the years ended December 31, 2020, 2019 and 2018 was the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets.

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See Item 8, Note 17, 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 .

The effective tax rate for the year ended December 31, 2019 also reflected the reversal of reserves for uncertain tax positions due to the closure of a tax audit and due to the close of applicable statutes of limitation.

The effective tax rate for the years ended December 31, 2020 and 2019 also reflected the reversal of reserves for uncertain tax positions due to the closure of tax audits and due to the closure of applicable statutes of limitation.

The year ended December 31, 2020 was also impacted by the carryback of federal net operating losses due to the income tax relief provided by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

The effective tax rate for year ended December 31, 2018 also reflected a $6.4 million income tax benefit resulting from the impact of adopting Topic 606 on intercompany activity in certain foreign jurisdictions.

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The financial results of those operations have been presented as discontinued operations in the consolidated financial statements.

See Item 8, Note 3 , Discontinued Operations , for additional information about the dispositions and see Item 8, Note 11 , Commitments and Contingencies , for information about indemnification obligations related to discontinued operations.

Non-GAAP Financial Measures

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The composition of our contingent consideration arrangements and the impact of those arrangements on our operating results vary over time based on a number of factors, including the terms of our business combinations and the timing of those transactions.

For the years ended December 31, 2019 , 2018 , 2017 , special charges and credits included charges related to our restructuring plan.

For the year ended December 31, 2018 , special charges and credits also included a $34.6 million charge related to our patent litigation with IBM.

For the year ended December 31, 2017 , special charges and credits also included a $17.1 million credit related to the sale of intangible assets (see Item 8, Note 6 , Goodwill and Other Intangible Assets ) .

For the year ended December 31, 2020, special charges and credits also included charges related to our restructuring plan, goodwill and long-lived asset impairments and strategic advisor costs.

For the year ended December 31, 2018, special charges and credits also included a charge related to our patent litigation with IBM.

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.

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Year Ended December 31,

2020 2019 2018

Income (loss) from continuing operations $ (286,562) $ (14,292) $ 1,988

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Acquisition-related expense (benefit), net 6 39 655

Restructuring charges (1)

Restructuring and related charges (1)

64,836 31 (136)

Goodwill impairment 109,486 — —

Long-lived asset impairment 22,351 — —

Strategic advisor costs 3,626 — —

IBM patent litigation — — 34,600

Gain on sale of intangible assets

Other (income) expense, net 16,968 53,329 53,008

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Adjusted EBITDA $ 49,739 $ 227,248 $ 269,807

Represents stock-based compensation expense recorded within Selling, general and administrative, Cost of revenue and Marketing.

Restructuring charges include $0.8 million of additional stock-based compensation for the year ended December 31, 2017 .

Stock-based compensation recorded within Restructuring for the years ended December 31, 2019 and 2018 was not material.

(1) Restructuring and related charges includes $21.6 million of long-lived asset impairments and $1.7 million of additional stock compensation for the year ended December 31, 2020.

Free cash flow .

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dollar for the years ended December 31, 2020 and 2019 (in thousands):

Year Ended December 31, 2019

Year Ended December 31, 2018

Year Ended December 31, 2020 Year Ended December 31, 2019

2019 Rates (1)

Exchange Rate Effect (2)

As Reported At Avg.

2018 Rates (1)

1 unchanged sentence

Gross billings $ 2,607,185 $ 11,873 $ 2,619,058 $ 4,696,950 $ (83,419) $ 4,163,531

Revenue 1,407,327 9,541 1,416,868 2,264,279 (45,364) 2,218,915

Cost of revenue 733,270 6,304 739,574 1,058,791 (26,005) 1,032,786

Gross profit 674,057 3,237 677,294 1,205,488 (19,359) 1,186,129

Marketing 153,865 669 154,534 345,568 (6,213) 339,355

Selling, general and administrative 602,162 1,023 603,185 823,527 (16,582) 806,945

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Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations, cash balances, which totaled $750.9 million as of December 31, 2019 , and available borrowing capacity under our 2019 Credit Agreement.

Our principal sources of liquidity are cash flows from operations and cash balances, which primarily consist of bank deposits and government money market funds.

As of December 31, 2020, cash balances, including outstanding borrowings under our Amended Credit Agreement, were $850.6 million.

Our net cash flows from operating, investing and financing activities from continuing operations for the years ended December 31, 2020, 2019 and 2018 were as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Cash provided by (used in):

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Year Ended December 31,

2020 2019 2018

Net cash provided by (used in) operating activities from continuing operations $ (63,598) $ 71,283 $ 190,855

1 unchanged sentence

Free cash flow $ (112,309) $ 3,955 $ 121,160

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 on a fixed payment schedule or upon the customer's redemption of the related voucher.

For merchants on fixed payment terms, we remit payments on an ongoing basis, generally bi-weekly, throughout the term of the merchant's offering.

For purchases of merchandise inventory, our supplier payment terms generally range from net 30 to net 60 days.

We have primarily paid merchants on fixed payment terms in North America and upon voucher redemption internationally.

In prior periods, we began to increase our use of redemption payment terms with our North America merchants and we expect that trend to continue.

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 upon the customer's redemption of the related voucher or fixed payment terms, which are generally biweekly, throughout the term of the merchant's offering.

Historically, we have primarily paid merchants on fixed payment terms in North America and upon voucher redemption internationally.

In prior periods, we began to increase our use of redemption payment terms with our North America merchants, and we accelerated this transition in 2020 to improve liquidity as our business was impacted by COVID-19.

We largely completed the transition to redemption payment terms in the third quarter 2020.

Our cash balances fluctuate significantly throughout the year based on many variables, including gross billings growth rates, the timing of payments to merchants and suppliers, seasonality and the mix of transactions between Goods and Local.

For example, we have historically generated strong cash inflows during the fourth quarter holiday

season, driven primarily by our Goods category, followed by significant cash outflows in the following period when payments are made to inventory suppliers.

For the year ended December 31, 2020, our net cash used in operating activities from continuing operations was $63.6 million, as compared with our $286.6 million loss from continuing operations.

That difference was primarily attributable to $295.6 million of non-cash items, including $109.5 million of goodwill impairment, $22.4 million of long-lived asset impairments, $21.6 million of restructuring-related impairments, depreciation and amortization and stock-based compensation, partially offset by a $72.6 million net decrease from changes in working capital and other assets and liabilities.

The working capital decrease was due to the impacts of COVID-19, partially offset by the transition to a third-party goods marketplace in North America.

For the year ended December 31, 2019, our net cash provided by operating activities from continuing operations was $71.3 million, as compared with our $14.3 million loss from continuing operations.

That difference was primarily attributable to $230.6 million of non-cash items, including depreciation and amortization, stock-based compensation, a $69.4 million loss from changes in fair value of our investment in Monster LP and a $51.4 million upward adjustment to an other equity investment for observable price changes in an orderly transaction.

That difference was primarily attributable to $230.2 million of non-cash items, including depreciation and amortization, stock-based compensation, a $69.4 million loss from changes in fair value of our investment in Monster LP and a $51.4 million upward adjustment to another equity investment for observable price changes in an orderly transaction.

The difference between our net cash provided by operating activities and our income from continuing operations due to non-cash items was, partially offset by a $145.0 million net decrease from changes in working capital and other assets and liabilities.

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That difference was primarily attributable to $206.8 million of non-cash items, including depreciation and amortization, and stock-based compensation.

The difference between our net cash provided by operating activities and our income from continuing operations due to non-cash items was partially offset by a $17.9 million net decrease from changes in working capital and other assets and liabilities.

The difference between net cash provided by operating activities and our income from continuing operations due to non-cash items was partially offset by a $17.9 million net decrease from changes in working capital and other assets and liabilities.

The working capital impact was primarily related to the seasonal timing of payments to inventory suppliers and also includes $42.1 million of the payment to IBM related to the settlement of our patent litigation.

For the year ended December 31, 2017 , our net cash provided by operating activities from continuing operations was $130.5 million , as compared with our $28.6 million income from continuing operations.

That difference was primarily attributable to $209.1 million of non-cash items, including depreciation and amortization, stock-based compensation and the gain on sale of intangible assets.

The difference between net cash provided by operating activities and our income from continuing operations due to non-cash items was partially offset by a $107.1 million decrease from changes in working capital and other assets and liabilities.

The working capital impact was primarily related to the seasonal timing of payments to inventory suppliers and payments related to our restructuring activities.

Our net cash used in investing activities from continuing operations was $21.3 million , $67.6 million and $136.0 million for the years ended December 31, 2020, 2019 and 2018.

For the year ended December 31, 2020, our net cash used in investing activities from continuing operations included purchases of property and equipment and capitalized software of $48.7 million, which was partially offset by proceeds from the sale of an investment of $31.6 million .

For the year ended December 31, 2019, our net cash used in investing activities from continuing operations included purchases of property and equipment and capitalized software of $67.3 million.

For the year ended December 31, 2018, our net cash used in investing activities from continuing operations included net cash paid for a business acquisition of $58.1 million, purchases of property and equipment and capitalized software of $69.7 million and net cash paid of $18.3 million for acquisitions of intangible assets, including $15.4 million related to the settlement of our IBM patent litigation.

For the year ended December 31, 2017 , our net cash used in investing activities from continuing operations included purchases of property and equipment and capitalized software of $59.2 million , proceeds of $18.3 million from the sale of intangible assets and proceeds of $16.6 million from sales and maturities of investments.

Our net cash used in financing activities was $92.6 million , $84.4 million and $138.0 million for the years ended December 31, 2019 , 2018 and 2017 .

Our net cash provided by financing activities was $176.8 million for the year ended December 31, 2020.

Our net cash used in financing activities was $92.6 million and $84.4 million for the years ended December 31 2019 and 2018.

For the year ended December 31, 2020, net cash provided by financing activities included $200.0 million of borrowings under our revolving credit facility, partially offset by $10.6 million in taxes paid related to net share settlements of stock-based compensation awards and $8.9 million in payments of finance lease obligations.

For the year ended December 31, 2019, net cash used in financing activities included $45.6 million in repurchases of common stock under our share repurchase program, $19.7 million in payments of finance lease obligations and $18.1 million in taxes paid related to net share settlements of stock-based compensation awards.

For the year ended December 31, 2018, net cash used in financing activities included $33.0 million in payments of finance lease obligations, $24.1 million in taxes paid related to net share settlements of stock-based compensation awards, $9.6 million in repurchases of common stock under our share repurchase program and an $8.4 million payment of a financing obligation related to a business acquisition.

For the year ended December 31, 2017 , net cash used in financing activities included $61.2 million in repurchases of common stock under our share repurchase program, $34.0 million in payments of finance lease obligations and $27.7 million in taxes paid related to net share settlements of stock-based compensation awards.

In May 2019, we entered into the 2019 Credit Agreement which provides for aggregate principal borrowings of up to $400.0 million and matures in May 2024.

As of December 31, 2019 , we had no borrowings under our 2019 Credit Agreement and were in compliance with all covenants.

In April 2016, we issued convertible notes with an aggregate principal amount of $250.0 million, due April 2022.

We received net proceeds of $243.2 million from the issuance of the Notes.

We have used the proceeds from the Notes for general corporate purposes, including repurchases of shares of our common stock.

Additionally, we entered into note hedge and warrant transactions with certain bank counterparties that are designed to offset, in

part, the potential dilution from conversion of the Notes.

See Item 8, Note 10, Financing Arrangements , for additional information.

As of December 31, 2019 , we had $205.2 million in cash held by our international subsidiaries, which is primarily denominated in Euros, British Pounds Sterling, Canadian dollars, and, to a lesser extent, Australian dollars

and Japanese yen.

The amendment to the revolving credit agreement (the "Amendment" and the revolving credit agreement as amended, the "Amended Credit Agreement") provides for aggregate principal borrowings of up to $225.0 million.

As of December 31, 2020, we had $200.0 million of borrowings and $20.6 million of letters of credit outstanding under the Amended Credit Agreement and were in compliance with all covenants.

In July 2020, we entered into an amendment of our Credit Agreement in order to, among other things, provide us operational flexibility and covenant relief through the end of the first quarter 2021 in light of the ongoing impacts of COVID-19 on our business.

We may need to seek additional covenant relief in the future depending on the timing and volatility of the recovery of our business from COVID-19.

In addition, the Amended Credit Agreement matures in May 2024.

If we do not redeem or refinance the Notes at least 91 days prior to their maturity, the maturity date of our Amended Credit Agreement will spring forward to January 2022, subject to certain exceptions.

We continue to evaluate our long-term capital structure, and may need to seek additional financing in the future.

See Item 1, Risk Factors and Item 8, Note 10, Financing Arrangements , for additional information.

We believe that our cash balances, excluding borrowings under the Amended Credit Agreement, and cash generated from operations will be sufficient to meet our working capital requirements and capital expenditures for at least the next 12 months.

We plan to continue to actively manage and optimize our cash balances and liquidity, working capital and operating expenses, although there can be no assurances that we will be able to do so.

In 2020, we took several steps to reduce costs and preserve cash in the near-term as described in Item 8, Note 3, COVID-19 Pandemic .

As of December 31, 2020, we had $267.5 million in cash held by our international subsidiaries, which is primarily denominated in Euros, British Pounds Sterling, Canadian dollars, and, to a lesser extent, Australian dollars and Japanese yen.

In general, it is our practice and intention to re-invest the earnings of our non-U.S.

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In May 2018, the Board of Directors authorized us to repurchase up to $300.0 million of our common stock under our share repurchase program.

During the year ended December 31, 2019 , we repurchased 14,027,227 shares for an aggregate purchase price of $45.2 million (including fees and commissions) under our repurchase program.

As of December 31, 2020, up to $245.0 million of common stock remained available for purchase under our program.

The timing and amount of share repurchases, if any, will be determined based on market conditions, limitations under the 2019 Credit Agreement, share price and other factors, and the program may be terminated at any time.

The timing and amount of share repurchases, if any, will be determined based on market conditions, limitations under the Amended Credit Agreement, share price, available cash and other factors, and the program may be terminated at any time.

Repurchases will be made in compliance with SEC rules and other legal requirements and may be made, in part, under a Rule 10b5-1 plan, which permits share repurchases when we might otherwise be precluded from doing so.

In April 2016, we issued convertible notes with an aggregate principal amount of $250.0 million .

We received net proceeds of $243.2 million from the issuance of the Notes.

We have used the proceeds from the Notes for general corporate purposes, including repurchases of shares of our common stock.

Additionally, we entered into note hedge and warrant transactions with certain bank counterparties that are designed to offset, in part, the potential dilution from conversion of the Notes.

See Item 8, Note 9 , Financing Arrangements , for additional information.

Our cash balances and cash flows generated from our operations may be used to fund strategic investments, business acquisitions, working capital needs, investments in technology, marketing and share repurchases.

Additionally, we have the ability to borrow funds under the 2019 Credit Agreement, which requires compliance with specified financial covenants.

Although we were in compliance with all covenants as of December 31, 2019, general economic conditions, as well as our future operating performance, which will be impacted by our plan to exit the Goods category by the end of 2020, could limit our access to funding under our revolving credit agreement.

We could also seek to raise additional financing, if available on terms that we believe are favorable, to increase the amount of liquid funds that we can access for acquisitions, share repurchases or other strategic investment opportunities.

We also believe our working capital will be impacted by our plan to exit the Goods category, and expect a one-time decrease in working capital, which could impact our liquidity.

Although we can provide no assurances, we believe that our cash balances and cash generated from operations should be sufficient to meet our working capital requirements and capital expenditures for at least the next twelve months.

Contractual Obligations and Commitments

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Payments due by period

Total 2021 2022 2023 2024 2025 Thereafter

Finance lease obligations (1)

$ 5,444 $ 4,717 $ 715 $ 12 $ — $ — $ —

Operating lease obligations (2)

138,641 38,690 35,451 27,025 19,599 16,175 1,701

Convertible senior notes (3)

266,250 8,125 258,125 — — — —

Purchase obligations (4)

82,567 27,365 27,452 27,730 20 — —

Total $ 492,902 $ 78,897 $ 321,743 $ 54,767 $ 19,619 $ 16,175 $ 1,701

(1) Finance lease obligations include both principal and interest components of future minimum finance lease payments.

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Actual results may differ from those estimates under different assumptions or conditions.

We believe that the estimates and assumptions related to revenue recognition, lease recognition, impairment assessments of goodwill and long-lived assets, income taxes and fair value option investments have the greatest potential impact on our consolidated financial statements.

We believe that the estimates and assumptions related to revenue recognition, lease recognition and measurement, impairment assessments of goodwill and long-lived assets, income taxes and fair value option investments have the greatest potential impact on our consolidated financial statements.

Therefore, we consider these to be our critical accounting policies and estimates.

Revenue Recognition

Refer to Item 8, Note 2 , Summary of Significant Accounting Policies and Item 8, Note 14 , Revenue Recognition , for information about our revenue recognition accounting policies, including estimates of our refund liabilities.

Refer to Item 8, Note 2 , Summary of Significant Accounting Policies and Item 8, Note 10 , Leases for information about our lease accounting policies, including lease recognition policy.

See Item 8, Note 2, Summary of Significant Accounting Policies and Item 8, Note 15, Revenue Recognition , for information about our revenue recognition accounting policies, including estimates of our refund liabilities and estimates of variable consideration from unredeemed vouchers.

See Item 8, Note 2, Summary of Significant Accounting Policies for information about our lease recognition and measurement accounting policies.

Impairment Assessments of Goodwill and Long-Lived Assets

Refer to Item 8, Note 2 , Summary of Significant Accounting Policies , and Note 6 , Goodwill and Other Intangible Assets , for information about our accounting policies relating to goodwill and impairment of long-lived assets.

See Item 8, Note 2, Summary of Significant Accounting Policies for information about our accounting policies relating to impairment of goodwill and long-lived assets.

Additional information about those accounting policies and estimates is set forth in the following paragraphs.

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However, such assumptions are inherently uncertain and actual results could differ from those estimates.

Our three reporting units as of October 1, 2019 were North America, EMEA (Europe, the Middle East and Africa) and Asia Pacific.

There was no impairment of goodwill for any reporting unit because the fair values of the reporting units exceeded their carrying values.

During the first quarter 2020, we determined a triggering event occurred that required us to evaluate our goodwill and long-lived assets for impairment, and we recorded impairment charges as a result of that assessment.

During the third quarter 2020, we exited our operations in Japan and New Zealand, which represents the majority of the countries in our Asia Pacific reporting unit.

As a result, we combined the remainder of the Asia Pacific reporting unit and the EMEA reporting unit into a single International reporting unit, consistent with how management reviews the operating results of the business.

Our two reporting units as of our October 1, 2020 annual goodwill impairment test were North America and International.

Future changes in our assumptions or the interrelationship of the assumptions described above may negatively impact future valuations.

In future measurements of fair value, adverse changes in assumptions could result in impairments of goodwill or long-lived assets that would require non-cash charges to the consolidated statements of operations and may have a material effect on our financial condition and operating results.

Refer to Item 8, Note 2 , Summary of Significant Accounting Policies , and Note 16 , Income Taxes , for information about our income tax accounting policies.

See Item 8, Note 2, Summary of Significant Accounting Policies , and Note 17, Income Taxes , for information about our income tax accounting policies.

Fair Value Option Investments

Refer to Item 8, Note 7 , Investments , for information about the fair value measurements of our fair value option investments.

See Item 8, Note 8, Investments , for information about the fair value measurements of our fair value option investments.

Estimating the fair values of our investments requires significant judgment regarding the assumptions that market participants would use in pricing those assets.

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Recently Issued Accounting Standards

For a description of recently issued accounting standards, please see Item 8, Note 2 , Summary of Significant Accounting Policies , to the consolidated financial statements of this Annual Report on Form 10-K.

For a description of recently issued accounting standards, please see Item 8, Note 2, Summary of Significant Accounting Policies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis