What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-25 compared with 2020-02-18 · 664 added, 653 removed, 1059 unchanged (55% of the section changed)

17 unchanged sentences

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Adoption of New Lease Accounting Standard

As discussed in Note 10 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of the guidance in ASC Topic 842, Leases , using the modified retrospective method.

Adoption of New Revenue Recognition Accounting Standard

As discussed in Note 14 to the financial statements, the Company has changed its method of accounting for revenue transactions in 2018 due to the adoption of the guidance in ASC Topic 606, Revenue from Contracts with Customers , using the modified retrospective method.

Change in Accounting Principle

As discussed in Notes 2 and 11 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of the guidance in ASC Topic 842, Leases , using the modified retrospective method.

Basis for Opinion

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The Company received a proposed income tax assessment from the tax authority in one foreign jurisdiction in the amount of $126.4 million, inclusive of estimated incremental interest from the original assessment.

believes the assessment, which primarily relates to transfer pricing on transactions occurring during 2011, is without merit and it intends to vigorously defend itself.

The Company believes the assessment, which primarily relates to transfer pricing on transactions occurring during 2011, is without merit and it intends to vigorously defend itself.

Given the complexity of the relevant tax laws and regulations, auditing management’s evaluation and accounting for the tax position associated with the foreign income tax assessment involved especially subjective and complex judgments.

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◦ Evaluating any developments in the matter during the current fiscal year through inquiry of Company personnel and their outside legal counsel.

Investments - Monster Holdings LP Fair Value Option Investment - Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

The Company has a minority interest investment in Monster Holdings LP, an entity based in the Republic of Korea, which is accounted for using the fair value method.

When determining the fair value of the investment, management is required to make significant estimates and assumptions, particularly regarding cash flow forecasts of the investee, including revenue growth, margins, and operating expenses.

The Company recorded a $69.4 million loss during 2019 due to a decline in the fair value of the investment.

The reported fair value of the investment at December 31, 2019 is $0.

Auditing the Company’s cash flow forecasts of the investee used in its valuation of its investment in Monster Holdings LP involved especially subjective judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasted cash flows of the investee included the following, among others:

We tested the effectiveness of controls over the measurement of the fair value of the investment, including those over the determination of forecasted cash flows of the investee.

We assessed the reasonableness of forecasted investee cash flows by (1) comparing the projections to historical results and previous forecasts, (2) considering the extent of management’s historical ability to reliably forecast prospective operating results of the investee, (3) obtaining and evaluating management’s written analysis supporting the forecasted cash flows of the investee, and (4) making direct inquiries of management of the investee regarding operating strategies and outlook of the business to assess the reasonability of management achieving the forecasted performance.

Goodwill—Refer to Notes 2, 3, and 7 to the financial statements

Critical Audit Matter Description

The Company’s annual evaluation of goodwill impairment involves the comparison of the fair value of each of the Company’s three reporting units to its carrying value.

The Company determines the fair value of its reporting units

using the income approach (including discounted cash flows) and the market approach.

With respect to the income approach, management makes significant estimates and assumptions related to forecasts of future performance, including revenues;

earnings before interest, income taxes, depreciation, and amortization (EBITDA) margins;

and risk-adjusted discount rates.

The Company’s annual and periodic evaluations of goodwill impairment involve the comparison of the fair value of each of the Company’s reporting units to its carrying value.

The Company determines the fair value of its reporting units using the income approach (including discounted cash flows).

With respect to the income approach, management makes significant estimates and assumptions related to forecasts of future performance, including revenues, cost of revenue, and operating expenses and risk-adjusted discount rates.

The goodwill balance subject to the impairment test was $214.7 million as of December 31, 2020.

Auditing the estimates and assumptions that impacted the valuation of the reporting units involved especially subjective judgment, specifically related to the forecasts of revenues, EBITDA margins, and selection of risk-adjusted discount rates.

The Company recorded goodwill impairment charges of $109.5 million for the year ended December 31, 2020.

Auditing the estimates and assumptions that impacted the valuation of the reporting units involved especially subjective judgment, specifically related to the forecasts of revenues and cost of revenue and operating expenses and selection of risk-adjusted discount rates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s forecasts of revenues and EBITDA margins, and its selection of risk-adjusted discount rates included the following, among others:

We tested the effectiveness of controls over the annual goodwill impairment assessment, including those over the forecasts.

We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results and previous forecasts, (2) internal communications to management and the Board of Directors, and (3) analyst and industry reports of the Company and companies in its peer group.

Our audit procedures related to the Company’s forecasts of revenues, cost of revenue, and operating expenses and its selection of risk-adjusted discount rates included the following, among others:

• We tested the effectiveness of controls over the annual and periodic goodwill impairment assessment, including those over the forecasts.

• We evaluated management’s ability to reliably forecast by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results and previous forecasts, (2) internal communications to management and the Board of Directors, (3) macroeconomic forecasts, and (4) forecasts utilized in other areas of the audit to evaluate consistency, where appropriate.

Additionally, we obtained and evaluated management’s written analysis supporting the forecasted cash flows.

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◦ Testing the source information and the mathematical accuracy of the calculation underlying the determination of the risk-adjusted discount rates, and developing a range of independent estimates and comparing those to the risk-adjusted discount rates selected by management.

Long-Lived Assets—Refer to Notes 2, 3 and 6 to the financial statements

Critical Audit Matter Description

The Company determined the significant deterioration in its financial performance due to the disruption in its operations from COVID-19 and the sustained decrease in its stock price required evaluation of its long-lived assets for impairment, which resulted in a $22.4 million impairment of its long-lived assets for the year ended December 31, 2020.

The Company determines the fair value of its asset groups using the income approach (including discounted cash flows).

With respect to the income approach, management makes significant estimates and assumptions related to forecasts of future performance, including revenue, cost of revenue, and operating expenses and risk-adjusted discount rates.

Auditing the estimates and assumptions that impacted the valuation of the asset groups involved especially subjective judgment, specifically related to the forecasts of revenues, cost of revenue, and operating expenses and selection of risk-adjusted discount rates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s forecasts of revenues, cost of revenue, and operating expenses and its selection of risk-adjusted discount rates included the following, among others:

• We tested the effectiveness of controls over the long-lived asset impairment assessment, including those over the forecasts.

• We evaluated management’s ability to reliably forecast by comparing actual results to management’s historical forecasts.

Additionally, we obtained and evaluated management’s written analysis supporting the forecasted cash flows.

• With the assistance of fair value specialists, we evaluated the reasonableness of the risk-adjusted discount rate by testing the source information and the mathematical accuracy of the calculation and developing a range of independent estimates and comparing those to the risk-adjusted discount rates selected by management.

/s/ Deloitte & Touche LLP

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Right-of-use assets - operating leases, net 75,349 108,390

Goodwill 214,699 325,017

Intangible assets, net 30,151 35,292

Investments (including $1,405 and $84,242 at December 31, 2019 and December 31, 2018 at fair value)

Investments 37,671 76,576

Other non-current assets 34,327 28,605

$ 1,411,507 $ 1,586,743

Liabilities and Equity

Current liabilities:

Short-term borrowings $ 200,000 $ —

Accounts payable 33,026 20,415

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Total Liabilities

1,303,833 1,191,697

Commitments and contingencies (see Note 12)

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Additional paid-in capital (1)

Treasury stock, at cost, 205,882,355 and 191,855,128 shares at December 31, 2019 and December 31, 2018

2,348,114 2,310,393

Treasury stock, at cost, 10,294,117 shares at December 31, 2020 and December 31, 2019 (1)

( 922,666 ) ( 922,666 )

Accumulated deficit ( 1,320,886 ) ( 1,032,876 )

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Stockholders' Equity

107,675 393,936

Noncontrolling interests ( 1 ) 1,110

107,674 395,046

Total Liabilities and Equity

$ 1,411,507 $ 1,586,743

(1) Prior period share information and balances have been retroactively adjusted to reflect a reverse stock split.

See Note 13, Stockholders' Equity for additional information.

See Notes to Consolidated Financial Statements.

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Year Ended December 31,

2020 2019 2018

Service $ 643,653 $ 1,126,357 1,205,487

Product 773,215 1,092,558 1,431,259

Total revenue 1,416,868 2,218,915 2,636,746

Cost of revenue:

Service 79,296 114,462 120,077

Product 660,278 918,324 1,196,068

Total cost of revenue 739,574 1,032,786 1,316,145

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

Operating expenses:

Marketing 154,534 339,355 395,737

Selling, general and administrative 603,185 806,945 870,961

Restructuring charges

Gain on sale of intangible assets

Goodwill impairment 109,486 — —

Long-lived asset impairment 22,351 — —

Restructuring and related charges 64,836 31 ( 136 )

Total operating expenses 954,392 1,146,331 1,266,562

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Income (loss) from continuing operations before provision (benefit) for income taxes

( 294,066 ) ( 13,531 ) 1,031

Provision (benefit) for income taxes ( 7,504 ) 761 ( 957 )

Income (loss) from continuing operations

( 286,562 ) ( 14,292 ) 1,988

Income (loss) from discontinued operations, net of tax

Net income (loss)

Net income attributable to noncontrolling interests

( 286,180 ) ( 11,695 ) 1,988

Net (income) loss attributable to noncontrolling interests ( 1,751 ) ( 10,682 ) ( 13,067 )

Net income (loss) attributable to Groupon, Inc.

Basic net income (loss) per share:

Continuing operations

Discontinued operations

Basic net income (loss) per share

Diluted net income (loss) per share:

$ ( 287,931 ) $ ( 22,377 ) $ ( 11,079 )

Basic and diluted net income (loss) per share:

Continuing operations $ ( 10.08 ) $ ( 0.88 ) $ ( 0.39 )

Discontinued operations 0.01 0.09 —

Diluted net income (loss) per share

Basic and diluted net income (loss) per share $ ( 10.07 ) $ ( 0.79 ) $ ( 0.39 )

Weighted average number of shares outstanding:

Basic 28,604,115 28,370,417 28,325,555

Diluted 28,604,115 28,370,417 28,325,555

(1) All share and per share information has been retroactively adjusted to reflect a reverse stock split.

See Note 13, Stockholders' Equity for additional information.

See Notes to Consolidated Financial Statements.

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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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Net change in unrealized gain (loss) on foreign currency translation adjustments ( 35,972 ) 4,858 3,332

Net change in unrealized gain (loss) on defined benefit pension plan

Available-for-sale securities:

Net unrealized gain (loss) during the period

Reclassification adjustment for realized (gain) loss on investment included in income (loss) from continuing operations

Net change in unrealized gain (loss) on available-for-sale securities (net of tax effect of $ 0 , $ 0 and $ 34 for the years ended December 31, 2020, 2019, and 2018)

— ( 379 ) ( 735 )

Other comprehensive income (loss) from continuing operations ( 35,972 ) 4,479 2,597

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Income (loss) from discontinued operations 382 2,597 —

Other comprehensive income (loss) from discontinued operations - foreign currency translation adjustments:

Net unrealized gain (loss) during the period

Reclassification adjustment included in income (loss) from discontinued operations

Net change in unrealized gain (loss)

Comprehensive income (loss) from discontinued operations 382 2,597 —

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Comprehensive income (loss) attributable to Groupon, Inc.

$ ( 323,903 ) $ ( 17,898 ) $ ( 8,482 )

See Notes to Consolidated Financial Statements.

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Stockholders' Equity

Common Stock (1)

Additional Paid-In Capital (1)

Treasury Stock (1)

Accumulated Deficit

Accumulated Other Comprehensive Income (Loss)

Total Groupon, Inc.

Stockholders' Equity

Non-controlling Interests

Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Groupon, Inc.

Stockholders' Equity Non-controlling Interests Total Equity

Shares Amount Shares Amount

Balance at December 31, 2017 37,427,093 $ 4 $ 2,174,779 ( 9,430,112 ) $ ( 867,450 ) $ ( 1,088,204 ) $ 31,844 $ 250,973 $ 872 $ 251,845

( 171,695,908

Cumulative effect of change in accounting principle

Cumulative effect of change in accounting principle due to adoption of ASC Topic 606, net of tax — — — — — 88,945 — 88,945 — 88,945

Reclassification for impact of U.S.

tax rate change — — — — — ( 161 ) 161 — — —

Comprehensive income (loss) — — — — — ( 11,079 ) 2,597 ( 8,482 ) 13,067 4,585

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Shares issued under employee stock purchase plan 81,053 — 5,634 — — — — 5,634 — 5,634

Shares issued to settle liability-classified awards 62,018 — 6,436 — — — — 6,436 — 6,436

Tax withholdings related to net share settlements of stock-based compensation awards ( 270,075 ) — ( 22,709 ) — — — — ( 22,709 ) — ( 22,709 )

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Balance at December 31, 2018 38,046,972 $ 4 $ 2,234,632 ( 9,592,756 ) $ ( 877,491 ) $ ( 1,010,499 ) $ 34,602 $ 381,248 $ 1,363 $ 382,611

( 188,602,242

Cumulative effect of change in accounting principle, net of tax

Reclassification for impact of U.S.

tax rate change

Comprehensive income (loss) — — — — — ( 22,377 ) 4,479 ( 17,898 ) 10,682 ( 7,216 )

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Shares issued under employee stock purchase plan 74,299 — 4,083 — — — — 4,083 — 4,083

Shares issued to settle liability-classified awards

Tax withholdings related to net share settlements of stock-based compensation awards ( 261,111 ) — ( 17,413 ) — — — — ( 17,413 ) — ( 17,413 )

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Balance at December 31, 2019 38,584,854 $ 4 $ 2,310,393 ( 10,294,117 ) $ ( 922,666 ) $ ( 1,032,876 ) $ 39,081 $ 393,936 $ 1,110 $ 395,046

( 191,855,128

Cumulative effect of change in accounting principle due to adoption of ASC Topic 326, net of tax — — — — — ( 79 ) — ( 79 ) — ( 79 )

Comprehensive income (loss) — — — — — ( 287,931 ) ( 35,972 ) ( 323,903 ) 1,751 ( 322,152 )

Exercise of stock options

Vesting of restricted stock units and performance share units 784,385 — — — — — — — — —

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Stock-based compensation on equity-classified awards — — 45,684 — — — — 45,684 — 45,684

Repurchases of common stock

Distributions to noncontrolling interest holders — — — — — — — — ( 2,862 ) ( 2,862 )

Balance at December 31, 2020 39,142,896 $ 4 $ 2,348,114 ( 10,294,117 ) $ ( 922,666 ) $ ( 1,320,886 ) $ 3,109 $ 107,675 $ ( 1 ) $ 107,674

( 205,882,355

(1) All share information and balances have been retroactively adjusted to reflect a reverse stock split.

See Note 13, Stockholders' Equity , for additional information.

See Notes to Consolidated Financial Statements.

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Year Ended December 31,

2020 2019 2018

Operating activities

Net income (loss)

$ ( 286,180 ) $ ( 11,695 ) $ 1,988

Income (loss) from discontinued operations, net of tax

Income (loss) from continuing operations

( 286,562 ) ( 14,292 ) 1,988

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization of property, equipment and software

77,792 91,410 101,330

Amortization of acquired intangible assets 9,730 14,355 14,498

Impairment of goodwill 109,486 — —

Impairment of long-lived assets 22,351 — —

Restructuring-related impairment 21,622 — —

Stock-based compensation

Gain on sale of intangible assets

(Gain) loss on sale of investment

39,010 81,615 64,821

Impairments of investments

6,684 9,961 10,156

Upward adjustment for observable price change of investment

— ( 51,397 ) —

Deferred income taxes

( 7,101 ) ( 1,485 ) ( 5,000 )

(Gain) loss from changes in fair value of investments

1,405 72,497 9,064

Amortization of debt discount on convertible senior notes

14,621 13,200 11,916

Change in assets and liabilities, net of acquisitions and dispositions:

Accounts receivable

13,524 13,577 32,057

Prepaid expenses and other current assets

42,249 3,176 7,166

Right-of-use assets - operating leases

22,463 26,226 —

Accounts payable

11,414 ( 17,401 ) 5,805

Accrued merchant and supplier payables

( 142,624 ) ( 109,176 ) ( 45,268 )

Accrued expenses and other current liabilities

36,159 ( 26,071 ) ( 31,430 )

Operating lease obligations ( 36,864 ) ( 28,552 ) —

( 18,957 ) ( 6,360 ) 13,752

Net cash provided by (used in) operating activities from continuing operations

( 63,598 ) 71,283 190,855

Net cash provided by (used in) operating activities from discontinued operations

Net cash provided by (used in) operating activities

( 63,598 ) 71,283 190,855

Investing activities

Purchases of property and equipment and capitalized software

( 48,711 ) ( 67,328 ) ( 69,695 )

Proceeds from sale of intangible assets

Proceeds from sales and maturities of investments

31,605 3,475 8,594

Acquisition of business, net of acquired cash

— — ( 58,119 )

Acquisitions of intangible assets and other investing activities

( 4,240 ) ( 3,738 ) ( 18,262 )

Net cash provided by (used in) investing activities from continuing operations

( 21,346 ) ( 67,591 ) ( 135,982 )

Net cash provided by (used in) investing activities from discontinued operations

Net cash provided by (used in) investing activities

( 20,122 ) ( 67,591 ) ( 135,982 )

Financing activities

Proceeds from borrowings under revolving credit agreement 200,000 — —

Issuance costs for revolving credit agreement

( 1,686 ) ( 2,384 ) —

Payments for repurchases of common stock

— ( 45,631 ) ( 9,585 )

Taxes paid related to net share settlements of stock-based compensation awards

( 10,607 ) ( 18,105 ) ( 24,105 )

Proceeds from stock option exercises and employee stock purchase plan

1,791 4,123 5,715

Distributions to noncontrolling interest holders

( 2,862 ) ( 10,935 ) ( 12,576 )

Payments of finance lease obligations

( 8,930 ) ( 19,687 ) ( 33,023 )

Payments of contingent consideration related to acquisitions

( 908 ) — ( 1,815 )

Payment of financing obligation related to acquisition

— — ( 8,391 )

Other financing activities

Net cash provided by (used in) financing activities

176,798 ( 92,619 ) ( 84,417 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations

6,574 ( 3,144 ) ( 11,209 )

Net increase (decrease) in cash, cash equivalents and restricted cash, including cash classified within current assets of discontinued operations

99,652 ( 92,071 ) ( 40,753 )

Net increase (decrease) in cash classified within current assets of discontinued operations

Net increase (decrease) in cash, cash equivalents and restricted cash

98,428 ( 92,071 ) ( 40,753 )

Cash, cash equivalents and restricted cash, beginning of period (1)

752,657 844,728 885,481

Cash, cash equivalents and restricted cash, end of period (1)

$ 851,085 $ 752,657 $ 844,728

See Notes to Consolidated Financial Statements.

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Year Ended December 31,

2020 2019 2018

Supplemental disclosure of cash flow information

Income tax payments (refunds) for continuing operations

Income tax payments (refunds) for discontinued operations

$ 3,262 $ 11,898 $ 2,781

Cash paid for interest

12,749 9,145 9,556

Non-cash investing and financing activities

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Equipment acquired under capital lease arrangements $ — $ — $ 18,064

Supplemental cash flow information on our leasing obligations

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases $ ( 522 ) $ ( 1,021 ) $ —

Operating cash flows from operating leases ( 36,864 ) ( 36,723 ) —

Right-of-use assets obtained in exchange for lease liabilities:

Finance leases — 3,929 —

Operating leases 16,415 27,293 —

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash shown above to amounts reported within the consolidated balance sheets as of December 31, 2020, 2019 and 2018 (in thousands):

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 December 31, 2019 December 31, 2018

Cash and cash equivalents $ 850,587 $ 750,887 $ 841,021

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Cash, cash equivalents and restricted cash $ 851,085 $ 752,657 $ 844,728

Please refer to Note 10 , Leases , for supplemental cash flow information on our leasing obligations, as required by our adoption of Accounting Standards Update ("ASU") 2016-02, Leases ("Topic 842"), on January 1, 2019.

See Notes to Consolidated Financial Statements.

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Groupon, Inc.

and subsidiaries, which commenced operations in October 2008, operates online local commerce marketplaces throughout the world that connect merchants to consumers by offering goods and services, generally at a discount.

Customers access those marketplaces through our mobile applications and our websites, primarily localized groupon.com sites in many countries.

and subsidiaries, which commenced operations in October 2008, is a global scaled two-sided marketplace that connects consumers to merchants by offering goods and services, generally at a discount.

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

Our operations are organized into two segments:

1 unchanged sentence

See Note 21, Segment Information

In connection with a strategic initiative to optimize our global footprint, we sold or ceased our operations in 12 countries between November 2016 and March 2017.

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

See Note 3 , Discontinued Operations , for additional information.

COVID-19 Pandemic

For the year ended December 31, 2020, the COVID-19 pandemic has had an adverse impact on our financial condition, results of operations and cash flow, including the impairment of our long-lived assets and goodwill.

See Note 3, COVID-19 Pandemic, for more information.

Reverse Stock Split

In June 2020, we effectuated a reverse stock split of our shares of common stock at a ratio of 1-for-20.

See Note 13, Stockholders' Equity , for additional information.

As a result, the number of shares and income (loss) per share disclosed throughout this Annual Report on Form 10-K have been retrospectively adjusted to reflect the reverse stock split.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Adoption of New Accounting Standards

We adopted the guidance in ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses of Financial Instruments ("CECL"), on January 1, 2020.

This ASU requires entities to measure credit losses for financial assets measured at amortized cost based on expected losses over the lifetime of the asset rather than incurred losses.

The adoption of ASU 2016-13 did not have a material impact on the consolidated financial statements.

We adopted the guidance in ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, on January 1, 2020.

This ASU eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill.

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

See Note 3, COVID-19 Pandemic , for additional information.

We adopted the guidance in ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements, on January 1, 2020.

This ASU modifies the disclosure requirements in Topic 820, Fair Value Measurements by removing, modifying, or adding certain disclosures.

The adoption of ASU 2018-13 did not have a material impact on the consolidated financial statements.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We adopted the guidance in ASU 2016-02, Leases (Topic 842) , on January 1, 2019.

This ASU requires the recognition of lease assets and liabilities for operating leases, in addition to the finance lease assets and liabilities historically recorded on our consolidated balance sheets.

See Note 10 , Leases , for additional information on the impact of adopting Topic 842 on our accounting policies.

We adopted Topic 842 using the modified retrospective transition method.

Beginning on January 1, 2019, our consolidated financial statements are presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies.

For additional information on the impact of adoption of Topic 842 on our accounting policies, refer to our discussion under Lease and Asset Retirement Obligations below .

The modified retrospective transition method required the cumulative effect, if any, of initially applying the guidance to be recognized as an adjustment to our accumulated deficit as of our adoption date.

As a result of adopting Topic 842, we recognized additional lease assets and liabilities of $ 109.6 million as of January 1, 2019.

The discount rate used to calculate that adjustment was the rate implicit in the lease, unless that rate was not readily determinable.

For leases for which the rate was not readily determinable, the discount rate used was our incremental borrowing rate as of the adoption date, January 1, 2019.

There was no cumulative effect adjustment to our accumulated deficit as a result of initially applying the guidance.

Aside from the impact to our consolidated balance sheet discussed above, lease accounting policies and presentation within the consolidated statement of operations and consolidated statements of cash flows is substantially consistent with historical treatment.

We elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of Topic 842.

Additionally, we elected to not separate lease and non-lease components for all of our leases.

For leases with a term of 12 months or less, we elected the short-term lease exemption, which allowed us to not recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the future.

We adopted the guidance in ASU 2018-07, Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, on January 1, 2019.

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The requirements of ASU 2018-15 have been applied on a prospective basis to implementation costs incurred on or after January 1, 2019.

As a result of the adoption of ASU 2018-15, we capitalized $ 7.4 million of implementation costs for the year ended December 31, 2019.

We have not recognized any amortization related to these implementation costs for the year ended December 31, 2019.

As a result of the adoption of ASU 2018-15, we capitalized $ 10.5 million and $ 7.4 million of implementation costs for the years ended December 31, 2020 and 2019.

We recognized $ 1.7 million of amortization related to these implementation costs for the year ended December 31, 2020.

We did no t recognize any amortization related to these implementation costs for the year ended December 31, 2019.

GROUPON, INC.

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We adopted Topic 606 using the modified retrospective method.

Beginning on January 1, 2018, results are presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies.

Beginning on January 1, 2018, results are presented in accordance with the revised policies.

The adoption of Topic 606 did not significantly impact our presentation of revenue on a gross or net basis.

13 unchanged sentences

We applied that measurement alternative to our equity investments that were previously accounted for under the cost method.

At the time of the adoption of ASU 2016-01, there was not a material impact on the consolidated financial statements.

The adoption of ASU 2016-01 did not have a material impact on the consolidated financial statements.

We adopted the guidance in ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash , on January 1, 2018.

This ASU requires companies to include amounts generally described as restricted cash and restricted cash equivalents, along with cash and cash equivalents, when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows.

Previously, changes in restricted cash were reported within cash flows from operating activities.

We applied that change in cash flow classification on a retrospective basis, which resulted in a $ 7.0 million decrease to net cash provided by operating activities for the year ended December 31, 2017 .

We adopted the guidance in ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets , on January 1, 2018.

13 unchanged sentences

As a result of the adoption of ASU 2018-02, we reclassified $ 0.2 million from accumulated other comprehensive income to accumulated deficit.

We adopted the guidance in ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business , on July 1, 2017.

This ASU provides clarification on the definition of a business and provides guidance on whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

The guidance in ASU 2017-01 was applied in determining that the sale of customer lists and other intangible assets in certain food delivery markets, as described in Note 6 , Goodwill and Other Intangible Assets , did not meet the definition of a business.

The adoption of ASU 2017-01 did not otherwise have a material impact on the consolidated financial statements.

We adopted the guidance in ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (Topic 740) , on January 1, 2017.

This ASU requires immediate recognition of the income tax consequences of intercompany asset transfers other than inventory.

We recorded a $ 3.2 million cumulative effect adjustment to increase our accumulated deficit as of January 1, 2017 to recognize the impact of that change in accounting policy.

We adopted the guidance in ASU 2015-11, Inventory (Topic 330) - Simplifying the Measurement of Inventory , on January 1, 2017.

This ASU requires inventory to be measured at the lower of cost or net realizable value, rather than the lower of cost or market.

The adoption of ASU 2015-11 did not have a material impact on the consolidated financial statements .

Reclassifications

Certain reclassifications have been made to the consolidated financial statements of prior periods and the accompanying notes to conform to the current period presentation, including the change in presentation of restricted cash in the consolidated statements of cash flows upon adoption of ASU 2016-18 as described above.

Certain reclassifications have been made to the consolidated financial statements of prior periods and the accompanying notes to conform to the current period presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenue and expenses, and the related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes.

Estimates are used for, but not limited to, variable consideration from unredeemed vouchers, income taxes, leases, initial valuation and subsequent impairment testing of goodwill and intangible assets, investments, customer refunds, contingent liabilities and the useful lives of property, equipment and software and intangible assets.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Estimates in our consolidated financial statements include, but are not limited to, variable consideration from unredeemed vouchers;

income taxes;

initial valuation and subsequent impairment testing of goodwill, other intangible assets and long-lived assets;

customer refunds and other reserves;

contingent liabilities;

and the useful lives of property, equipment and software and intangible assets.

Actual results could differ materially from those estimates.

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Accounts receivable primarily represents the net cash due from credit card and other payment processors and from merchants and performance marketing networks for commissions earned on consumer purchases.

The carrying amount of receivables is reduced by an allowance for doubtful accounts that reflects management's best estimate of amounts that will not be collected.

The allowance is based on historical loss experience and any specific risks identified in collection matters.

Accounts receivable are charged off against the allowance for doubtful accounts when it is determined that the receivable is uncollectible.

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The carrying amount of receivables is reduced by an allowance for expected credit losses that reflects management's best estimate of amounts that will not be collected.

We establish an allowance for expected credit losses on accounts receivable based on identifying the following customer risk characteristics:

size, type of customer, and payment terms offered in the normal course of business.

Receivables with similar risk characteristics are grouped into pools.

For each pool, we consider the historical credit loss experience, current economic conditions, bankruptcy filings, published or estimated credit default rates, age of the receivable and any recoveries in assessing the lifetime expected credit losses.

Inventories, consisting of merchandise purchased for resale, are accounted for using the first-in, first-out method of accounting and are valued at the lower of cost or net realizable value.

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Property and Equipment

Property and equipment are stated at cost and assets under finance leases are stated at the lesser of the present value of minimum lease payments or their fair market value.

Property and equipment are stated at cost.

Depreciation and amortization of property and equipment is recorded on a straight-line basis over the estimated useful lives of the assets.

Generally, the useful lives are three to five years for computer hardware and office equipment, five to ten years for furniture and fixtures and warehouse equipment and the shorter of the term of the lease or five years for leasehold improvements and assets under finance leases.

Generally, the useful lives are three to five years for computer hardware, office equipment and furniture and fixtures and the shorter of the term of the lease or five years for leasehold improvements and assets under finance leases.

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Internal-Use Software

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Cloud Computing Costs

We have entered into non-cancellable cloud computing hosting arrangements for which we incur implementation costs.

We have entered into non-cancelable cloud computing hosting arrangements for which we incur implementation costs.

Costs incurred in the planning and evaluation stage of the cloud computing hosting arrangement are expensed as incurred.

Costs incurred during the application development stage related to implementation of the hosting arrangement are capitalized and included within Other non-current assets on the consolidated balance sheets.

Costs incurred during the application development stage related to implementation of the hosting arrangement are capitalized and included within Other current and non-current assets on the consolidated balance sheets.

Amortization of implementation costs is recorded on a straight-line basis over the term of the associated hosting arrangement for each module or component of the related hosting arrangement when it is ready for its intended use.

Amortization costs will be recorded primarily in Selling, general and administrative expense on the consolidated statements of operations.

Impairment of Long-Lived Assets

Long-lived assets, such as property, equipment and software and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

If circumstances require that a long-lived asset or asset group to be held and used be tested for possible impairment, we first compare the undiscounted cash flows expected to be generated by that long-lived asset or asset group to its carrying amount.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value.

Long-lived assets or disposal groups classified as held for sale are recorded at the lower of their carrying amount or fair value less estimated selling costs.

Long-lived assets are not depreciated or amortized while classified as held for sale.

Goodwill is allocated to our reporting units at the date the goodwill is initially recorded.

Amortization costs are recorded primarily in Selling, general and administrative expense on the consolidated statements of operations.

Goodwill is allocated to our reporting units at acquisition.

Once goodwill has been allocated to the reporting units, it no longer retains its identification with a particular acquisition and becomes identified with the reporting unit in its entirety.

Accordingly, the fair value of the reporting unit as a whole is available to support the recoverability of its goodwill.

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We evaluate goodwill for impairment annually on October 1 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable.

We have the option to assess goodwill for impairment by first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount.

If we determine that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, or if we do not elect the option to perform an initial qualitative assessment, we perform the two-step goodwill impairment test.

In the first step, the fair value of the reporting unit is compared with its book value including goodwill.

If the fair value of the reporting unit is in excess of its book value, the related goodwill is not impaired and no further analysis is necessary.

If the fair value of the reporting unit is less than its book value, there is an indication of potential impairment and a second step is performed.

When required, the second step of testing involves calculating the implied fair value of goodwill for the reporting unit.

The implied fair value of goodwill is determined in the same manner as goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit determined in step one over the fair value of its net assets, including identifiable intangible assets, as if the reporting unit had been acquired.

If the carrying value of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

For reporting units with a negative book value (i.e., excess of liabilities over assets), we evaluate qualitative factors to determine whether it is necessary to perform the second step of the goodwill impairment test.

During the fourth quarter of 2019, we determined the deterioration of our financial condition when compared with our previous projections to be a triggering event requiring assessment of goodwill impairment as of December 31, 2019.

There was no goodwill impairment recognized for the year ended December 31, 2019 as a result of that assessment.

If it is determined that the reporting unit fair value is more-likely-than-not less than its carrying value, or if we do not elect the option to perform an initial qualitative assessment, we perform a quantitative assessment of the reporting unit's fair value.

If the fair value of the reporting unit is in excess of its carrying value, the related goodwill is not impaired.

If the fair value is less than the carrying value, we recognize an impairment equal to the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying value of goodwill.

During the first quarter 2020, we determined a triggering event occurred that required us to evaluate our goodwill for impairment, and we recorded an impairment charge 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.

See Note 3, COVID-19 Pandemic , and Note 7, Goodwill and Other Intangible Assets, for more information.

Investments in equity shares without a readily determinable fair value and for which we do not have the ability to exercise significant influence are accounted for at cost adjusted for observable price changes and impairments, with changes in the measurement recognized through net income (loss).

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Available-for-sale securities are recorded at fair value each reporting period.

Unrealized gains and losses, net of the related tax effects, are excluded from earnings and recorded as a separate component within Accumulated other comprehensive income (loss) on the consolidated balance sheets until realized.

Unrealized gains and losses, net of the related tax effects, are excluded from earnings and recorded as a separate component within Accumulated other

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

comprehensive income (loss) on the consolidated balance sheets until realized.

Interest income from available-for-sale securities is reported within Other income (expense), net on the consolidated statements of operations.

Other-than-Temporary Impairment of Investments

An unrealized loss exists when the current fair value of an investment is less than its cost basis.

We conduct reviews of our available-for-sale investments with unrealized losses on a quarterly basis to evaluate whether those impairments are other-than-temporary.

This evaluation, which is performed at the individual investment level, considers qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as our intent and ability to hold the investment for a period of time that is sufficient to allow for an anticipated recovery in value.

Evidence considered in this evaluation includes the amount of the impairment, the length of time that the investment has been impaired, the factors contributing to the impairment, the financial condition and near-term prospects of the investee, recent operating trends and forecasted performance of the investee, market conditions in the geographic area or industry in which the investee operates and our strategic plans for holding the investment in relation to the period of time expected for an anticipated recovery in value.

Additionally, we consider whether we intend to sell the investment or whether it is more likely than not that it will be required to sell the investment before recovery of its amortized cost basis.

Investments with unrealized losses that are determined to be other-than-temporary are written down to fair value with a charge to earnings.

Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in Accumulated other comprehensive income (loss) for available-for-sale securities.

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We account for income taxes using the asset and liability method, under which deferred income tax assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases.

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We have entered into various non-cancelable operating lease agreements for our offices and data centers and non-cancelable finance lease agreements for property and equipment.

On January 1, 2019, we adopted Topic 842 using the modified retrospective transition method.

Beginning on January 1, 2019, results are presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies.

See Note 10 , Leases , for additional information on the impact of adoption of Topic 842.

Significant judgment is required when determining whether a contract is or contains a lease.

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Minimum lease payments made under operating and finance leases are apportioned between interest expense and a reduction of the related operating and finance lease obligations.

Operating lease costs, including interest expense on operating leases, are presented within Selling, general and administrative expense on the consolidated statements of operations and the related operating lease obligation is presented within Accrued expenses and other current liabilities and Operating lease obligations on the consolidated balance sheets.

Amortization and interest expense on finance leases are presented within Selling, general and administrative expense and Other income (expense), net on the consolidated statements of operations and the related finance lease obligation is presented within Accrued expenses and other current liabilities and Other non-current liabilities on the consolidated balance sheets.

Operating lease costs, including interest expense on operating leases, are presented

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As discussed above, the present value of minimum lease payments is used in determining the value of our operating and finance leases.

within Selling, general and administrative expense on the consolidated statements of operations and the related operating lease obligation is presented within Accrued expenses and other current liabilities and Operating lease obligations on the consolidated balance sheets.

Amortization and interest expense on finance leases are presented within Selling, general and administrative expense and Other income (expense), net, respectively, on the consolidated statements of operations and the related finance lease obligation is presented within Accrued expenses and other current liabilities and Other non-current liabilities on the consolidated balance sheets.

As discussed above, the present value of minimum lease payments is used in determining the value of our operating and finance lease liabilities.

The discount rate used to calculate the present value for lease payments is the rate implicit in the lease, unless that rate cannot be readily determined.

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Those costs are expenses in the period in which they are incurred.

We establish assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease.

Such assets are amortized over the lease term, and the recorded liabilities are accreted to the future value of the estimated retirement costs.

The related amortization and accretion expenses are presented within Selling, general and administrative on the consolidated statements of operations.

We establish liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease.

Those costs are capitalized and amortized over the lease term, and the recorded liabilities are accreted to the future value of the estimated retirement costs.

The related amortization and accretion expenses are presented within Selling, general and administrative expense on the consolidated statements of operations.

We have also subleased certain office facilities under operating lease agreements, for which we recognize sublease income on a straight-line basis over their respective lease terms.

Sublease income is generally presented within Selling, general and administrative expense on the consolidated statements of operations.

Revenue Recognition

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Revenue from hotel reservation offerings is recognized at the time the reservation is made, net of an allowance for estimated cancellations.

Prior to our adoption of Topic 606, we deferred the revenue from hotel reservation offerings until the customer's stay commenced.

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

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Additionally, we earn advertising revenue when the advertiser's logo or website link has been included on our websites or in specified email distributions for the requisite period of time as set forth in the agreement with the advertiser.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Product revenue

We generate product revenue from direct sales of merchandise inventory to customers through our Goods category.

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

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For merchant agreements with redemption payment terms, the merchant is not paid its share of the sale price for a voucher sold through one of our online marketplaces until the customer redeems the related voucher.

If the customer does not redeem a voucher with such merchant payment terms, we retain all of the gross billings for that

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

voucher, rather than retaining only our net commission.

We estimate the variable consideration from vouchers that will not ultimately be redeemed using our historical voucher redemption experience and recognize that amount as revenue at the time of sale.

We only recognize amounts in variable consideration when we believe it is probable that a significant reversal of revenue will not occur in future periods, which requires us to make significant estimates of future redemptions.

If the customer does not redeem a voucher with such merchant payment terms, we retain all of the gross billings for that voucher, rather than retaining only our net commission.

We estimate the variable consideration from vouchers that will not ultimately be redeemed using our historical voucher redemption experience at the time of sale.

We apply a constraint to ensure it is probable that a significant reversal of revenue will not occur in future periods.

In 2020, we have increased our constraint on revenue from unredeemed vouchers as customer redemptions have decreased due to the impacts of COVID-19 and may not be reflective of future redemption behavior.

If actual redemptions differ from our estimates, the effects could be material to the consolidated financial statements.

As of December 31, 2019 and 2018, we constrained $ 14.6 million and $ 13.7 million in revenue from unredeemed vouchers that we may recognize in future periods when we determine it is probable that a significant amount of that revenue will not be subsequently reversed.

Prior to our adoption of Topic 606, we recognized that variable consideration from unredeemed vouchers and derecognized the related accrued merchant payables when our legal obligation to the merchant expired.

Refunds are recorded as a reduction of revenue.

The liability for estimated refunds is included within Accrued expenses and other current liabilities on the consolidated balance sheets.

Prior to our adoption of Topic 606, we classified refunds on service revenue transactions for which the merchant's share of the refund amount is not recoverable as a cost of revenue.

We estimate our refund reserve using historical refund experience by category.

We assess the trends that could affect our estimates on an ongoing basis and make adjustments to the refund reserve calculations if it appears that changes in circumstances, including changes to our refund policies or general economic conditions, may cause future refunds to differ from our initial estimates.

In 2020, we have experienced increased refund levels due to the impacts of COVID-19.

If actual refunds differ from our estimates, the effects could be material to the consolidated financial statements.

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To a lesser extent, credits are issued for customer relationship purposes.

Credits issued to satisfy refund requests are applied as a reduction to the refunds reserve and customer credits issued for relationship purposes are classified as a reduction of revenue.

Prior to our adoption of Topic 606, we classified credits issued to consumers for relationship purposes as a marketing expense.

Credits issued to satisfy refund requests are applied as a reduction to the refund reserve and customer credits issued for relationship purposes are classified as a reduction of revenue.

Breakage income from customer credits that are not expected to be used is estimated and recognized as revenue in proportion to the pattern of redemption for customer credits that are used.

Prior to our adoption of Topic 606, we recognized breakage income for unused customer credits when they expired or were forfeited.

Customer credits can be redeemed through our online marketplaces for goods or services provided by a third-party merchant or for merchandise inventory sold by us.

When customer credits are redeemed for goods or services provided by a third-party merchant, service revenue is recognized on a net basis as the difference between the carrying amount of the customer credit liability derecognized and the amount due to the merchant for the related transaction.

When customer credits are redeemed for merchandise inventory sold by us, product revenue is recognized on a gross basis equal to the amount of the customer credit liability derecognized.

Historically, customer credits have primarily been used within one year of issuance;

however, usage patterns have been impacted from changes in customer behavior due to COVID-19.

Sales and Related Taxes

Sales, use, value-added and related taxes that are imposed on specific revenue-generating transactions are presented on a net basis and excluded from revenue.

Costs of Obtaining Contracts

Incremental costs to obtain contracts with third-party merchants, such as sales commissions, are deferred and recognized over the expected period of the merchant arrangement, generally from 12 to 18 months.

Those costs are classified within Selling, general and administrative expenses in the consolidated statements of operations.

Prior to our adoption of Topic 606, we expensed the incremental costs to obtain contracts with third-party merchants, such as sales commissions, as incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Costs of Obtaining Contracts

Incremental costs to obtain contracts with third-party merchants, such as sales commissions, are deferred and recognized on a straight-line basis over the expected period of the merchant arrangement, generally from 12 to 18 months.

Those costs are classified within Selling, general and administrative expense in the consolidated statements of operations.

Cost of Revenue

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Fulfillment costs are comprised of third-party logistics provider costs, as well as rent, depreciation, personnel costs and other costs of operating our fulfillment center.

Impairment of Long-Lived Assets

We review our long-lived assets, such as property, equipment and software, intangible assets and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

Long-lived assets or disposal groups classified as held for sale are recorded at the lower of their carrying amount or fair value less estimated selling costs.

Long-lived assets are not depreciated or amortized while classified as held for sale.

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

See Note 3, COVID-19 Pandemic , for more information.

During the year ended December 31, 2020, we recognized long-lived asset impairment charges related to our restructuring plan.

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

Stock-Based Compensation

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Foreign currency gains and losses resulting from transactions that are denominated in currencies other than the entity's functional currency, including foreign currency gains and losses on intercompany balances that are not of a long-term investment nature, are included within Other income (expense), net on the consolidated statements of operations.

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Business Combinations

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Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses of Financial Instruments .

This ASU requires entities to measure credit losses for financial assets measured at amortized cost based on expected losses rather than incurred losses.

For available-for-sale debt securities with unrealized losses, entities will be required to recognize credit losses through an allowance for credit losses.

The ASU will be effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods.

We believe that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment .

This ASU eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill.

The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted.

We believe that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement .

This ASU modifies the disclosure requirements

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in Topic 820, Fair Value Measurement, by removing, modifying, or adding certain disclosures.

The ASU will be effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods.

Early adoption is permitted, and entities are permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until the effective date.

We believe that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.

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The ASU will be effective for annual reporting periods beginning after December 15, 2020 and interim periods within those annual periods and early adoption is permitted.

We believe that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments .

This ASU amends a wide variety of Topics in the Codification, including revolving-debt arrangements and allowance for credit losses related to leases.

This ASU will be effective for annual reporting periods beginning after December 15, 2020 and interim periods within those annual periods and early adoption is permitted.

We believe that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity .

This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity, and also improves and amends the related EPS guidance for both Subtopics.

This ASU will be effective for annual reporting periods beginning after December 15, 2021 and interim periods within those annual periods and early adoption is permitted.

We believe the accounting for our convertible senior notes will be affected by ASU 2020-06, however, we are still assessing the impact on our consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements .

This ASU amends a variety of Topics, including presentation and disclosures of financial statements, interim reporting, accounting changes and error corrections.

This ASU will be effective for annual reporting periods beginning after December 15, 2021 and interim periods within those annual periods beginning after December 15, 2022 and early adoption is permitted.

We are still assessing the impact of ASU 2020-10 on our consolidated financial statements.

There are no other accounting standards that have been issued but not yet adopted that we believe could have a material impact on our consolidated financial statements.

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COVID-19 PANDEMIC

Since March 2020, the COVID-19 pandemic has led to a significant decrease in consumer demand, a decrease in customer redemptions and elevated refund levels 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 COVID-19 pandemic has had an adverse impact on our financial condition, results of operations and cash flows.

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.

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, preserve cash in the near-term and improve liquidity, including, but not limited to:

reducing our workforce and 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 all members of our Board of Directors ("the Board");

and amending our Credit Agreement (See Note 10, Financing Arrangements) to, among other things, provide covenant relief through the first quarter of 2021.

The future impact of COVID-19 on our business, results of operations, financial condition and liquidity is highly uncertain and will ultimately depend on future developments, including the magnitude and duration of the pandemic and the protective measures associated with reducing its spread.

During the first quarter 2020, we determined the significant deterioration in our financial performance due to the disruption in our operations from COVID-19 and the sustained decrease in our stock price required us to evaluate our long-lived assets and goodwill for impairment, which resulted in impairments of our long-lived assets and goodwill.

See Note 6, Property, Equipment and Software, Net , Note 7, Goodwill and Other Intangible Assets , Note 9, Supplemental Consolidated Balance Sheets and Statements of Operations Information and Note 11, Leases, for more information.

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.

Actions taken under our restructuring plan changed how we used certain long-lived assets and required us to evaluate those long-lived assets for impairment, which resulted in impairments of our long-lived assets.

These impairments are included in Restructuring and related charges on the consolidated statement of operations.

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

COVID-19 impacted the financial performance of our investees and resulted in an impairment of an Other equity investment and a loss on a fair value option investment that are included in Other income (expense), net on the consolidated statement of operations.

See Note 8, Investments, for more information.

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DISCONTINUED OPERATIONS

In October 2016, we completed a strategic review of our international markets in connection with our efforts to optimize our global footprint and focus on the markets that we believe have the greatest potential to benefit our long-term financial performance.

Based on that review, we decided to focus our business on 15 core countries and to pursue strategic alternatives for our operations in the remaining 12 countries, which were primarily based in Asia and Latin America.

In October 2016, we completed a strategic review of our international markets and decided to pursue strategic alternatives for our operations in 12 countries, which were primarily based in Asia and Latin America.

The dispositions of our operations in those 12 countries were completed between November 2016 and March 2017.

A business disposition that represents a strategic shift and has (or will have) a major effect on our operations and financial results is reported as a discontinued operation.

We determined that the decision reached by management and our Board of Directors to exit those 12 non-core countries, which comprised a substantial majority of the operations outside of North America and EMEA (Europe, the Middle East and Africa), represented a strategic shift in our business.

Additionally, based on our review of quantitative and qualitative factors relevant to the dispositions, we determined that the disposition of the businesses in those countries would have a major effect on our operations and financial results.

As such, the results of operations and cash flows for the operations in those countries, including the gains and losses on the dispositions and related income tax effects, are presented as discontinued operations in the accompanying consolidated financial statements.

In connection with our strategic initiative to exit non-core countries as discussed above, we sold an 83 % controlling stake in our subsidiary in Israel and sold our subsidiaries in Argentina, Chile, Colombia, Peru, Mexico, Brazil, Singapore and Hong Kong during the first quarter 2017 .

For the year ended December 31, 2017 , we recognized a net pretax loss of $ 1.6 million on those dispositions, which consisted of the following (in thousands):

Year Ended December 31, 2017

Net consideration received:

Fair value of minority investments retained or acquired

Cash proceeds received

Cash proceeds receivable

Transaction costs

Total net consideration received

Cumulative translation gain reclassified to earnings

Net book value upon closing of the transactions

Indemnification liabilities (1)

Unfavorable contract liability for transition services

Loss on dispositions

In connection with the dispositions of our operations in Latin America, we recorded indemnification liabilities for certain tax and other matters.

See Note 12, Commitments and Contingencies , for additional information about the indemnification liabilities.

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The following table summarizes the major classes of line items included in income (loss) from discontinued operations, net of tax, for the years ended December 31, 2019 and 2017 (in thousands).

For the years ended December 31, 2020 and 2019, we recognized $ 0.4 million and $ 2.6 million in income (loss) from discontinued operations, net of tax primarily for a gain related to the expiration of certain contingent liabilities under indemnification agreements.

There was no activity related to discontinued operations for the year ended December 31, 2018.

Year Ended December 31,

Service revenue

Product revenue

Service cost of revenue

Product cost of revenue

Marketing expense

Selling, general and administrative expense (2)

Restructuring

Other income (expense), net

Income (loss) from discontinued operations before loss on dispositions and provision for income taxes

Loss on dispositions

Provision for income taxes

Income (loss) from discontinued operations, net of tax

The loss from discontinued operations before loss on dispositions and provision for income taxes for the year ended December 31, 2017 includes the results of each business through its respective disposition date.

Selling, general and administrative expense from discontinued operations for the year ended December 31, 2019 primarily consists of a gain related to the expiration of certain contingent liabilities under indemnification agreements.

Selling, general and administrative expense from discontinued operations for the year ended December 31, 2017 includes increases to contingent liabilities under indemnification agreements.

See Note 11 , Commitments and Contingencies , for additional information about the indemnification liabilities.

BUSINESS COMBINATIONS

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("Cloud Savings"), a UK-based business that operates online discount code and digital gift card platforms.

Concurrent with the acquisition, we entered into an agreement that gave us the right to acquire the remaining outstanding shares of Cloud Savings, and in December 2018 we exercised that right.

The primary purpose of this acquisition was to expand digital coupon offerings in our International segment.

The transaction included a contingent consideration arrangement with an acquisition-date fair value of $ 1.6 million .

In addition, concurrent with the acquisition, we entered into an agreement with the noncontrolling shareholder that gave us the right to acquire and the noncontrolling shareholder's right to put to us the remaining outstanding shares of Cloud Savings in December 2018 .

The acquisition-date fair value of the right and obligation to acquire the remaining outstanding shares of $ 8.6 million was initially recorded as a financing obligation and classified within Accrued expenses and other current liabilities on the consolidated balance sheets.

We paid $ 8.4 million to exercise that right in December 2018 .

The aggregate acquisition-date fair value of the consideration transferred for the Cloud Savings acquisition totaled $ 74.6 million , which consisted of the following (in thousands):

Financing obligation

Contingent consideration

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the allocation of the aggregate acquisition price of the Cloud Savings acquisition (in thousands):

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Property, equipment and software

Intangible assets (1) :

Merchant relationships

Developed technology

Other intangible assets

Total assets acquired

Accounts payable

Accrued merchant and supplier payables

Accrued expenses and other current liabilities

Other non-current liabilities

Total liabilities assumed

Total acquisition price

The estimated useful lives of the acquired intangible assets are 6 years for merchant relationships, 8 years for trade names, 2 years for developed technology, and 1 year for other intangible assets.

The results of the Cloud Savings acquisition are included in the consolidated financial statements beginning on the acquisition date of April 30, 2018.

The aggregate acquisition-date fair value of the consideration transferred for the Cloud Savings acquisition was $ 74.6 million.

The results of the Cloud Savings acquisition were included in the consolidated financial statements beginning on the acquisition date of April 30, 2018.

The revenue and net income of Cloud Savings included in our consolidated statements of operations were $ 12.9 million and $ 1.1 million for the period from April 30, 2018 through December 31, 2018.

Pro forma results of operations for the Cloud Savings acquisition are not presented because the pro forma effects of that acquisition were not material to our consolidated results of operations.

In connection with the acquisition of Cloud Savings, we incurred $ 0.7 million of external transaction costs, primarily consisting of legal and advisory fees.

Those costs are classified within Selling, general and administrative on the consolidated statements of operations.

We did not acquire any other businesses during the years ended December 31, 2020, 2019 and 2018.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PROPERTY, EQUIPMENT AND SOFTWARE, NET

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Internally-developed software (1)

264,103 222,140

Total property, equipment and software, gross 416,334 436,384

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Property, equipment and software, net $ 85,284 $ 124,950

Includes computer hardware acquired under finance leases of $ 78.5 million and $ 120.5 million as of December 31, 2019 and 2018 .

(1) The net carrying amount of internally-developed software was $ 57.9 million and $ 71.1 million as of December 31, 2020 and 2019.

Due to the triggering event and subsequent review of long-lived assets for impairment in the first quarter of 2020 described in Note 3, COVID-19 Pandemic , we recognized long-lived asset impairment of property, equipment and software, net of $ 15.2 million within our International segment related to our EMEA operations.

The assets that we deemed impaired were written down to fair value based on the discounted cash flow method that uses Level 3 inputs.

The significant estimates used in the discounted cash flow models are the risk-

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

adjusted discount rates;

forecasted revenue, cost of revenue and operating expenses;

forecasted capital expenditures and working capital needs;

weighted-average cost of capital;

rates of long-term growth;

and income tax rates.

The following table summarizes impairment for long-lived assets by asset type for the year ended December 31, 2020 (in thousands), of which $ 9.6 million is included in $ 22.4 million of Long-lived asset impairment and $ 5.6 million is included in $ 21.6 million of Restructuring and related charges on the consolidated statements of operations:

Long-Lived Asset Category Impairment

Property, equipment and software, net

Furniture and fixtures $ 413

Leasehold improvements 8,419

Office equipment 198

Purchased software 14

Computer hardware 2,842

Capitalized software 304

Internally-developed software 2,988

Total $ 15,178

Depreciation and amortization expense on property, equipment and software is classified as follows in the accompanying consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31,

2020 2019 2018

Service cost of revenue $ 28,443 $ 28,917 $ 28,102

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Selling, general and administrative 39,915 56,027 64,761

Total $ 77,792 $ 91,410 $ 101,330

The above amounts include amortization of internally-developed software of $ 58.8 million, $ 56.6 million and $ 53.9 million, and amortization expense on assets under finance leases of $ 6.7 million, $ 18.9 million and $ 30.2 million, for the years ended December 31, 2020, 2019 and 2018.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes goodwill activity by segment for the years ended December 31, 2020 and 2019 (in thousands):

North America

International

North America International (1)

Balance as of December 31, 2018 $ 178,685 $ 146,806 $ 325,491

Goodwill related to acquisition

Foreign currency translation

— ( 474 ) ( 474 )

Balance as of December 31, 2019 $ 178,685 $ 146,332 $ 325,017

Impairment — ( 109,486 ) ( 109,486 )

Foreign currency translation

— ( 832 ) ( 832 )

Balance as of December 31, 2020 $ 178,685 $ 36,014 $ 214,699

(1) As of December 31, 2020, the International reporting unit had a negative carrying value.

Due to the triggering event and subsequent review of goodwill for impairment in the first quarter of 2020, as described in Note 3, COVID-19 Pandemic , we recognized goodwill impairment of $ 109.5 million within our International segment related to our EMEA operations.

In order to evaluate goodwill for impairment in the first quarter 2020, we compared the fair values of our three reporting units (North America, EMEA and Asia Pacific) to their carrying values.

In determining fair values for our reporting units, we used the discounted cash flow method and the market multiple valuation approach that use Level 3 inputs.

The significant estimates used in the discounted cash flow models are the risk-adjusted discount rates;

forecasted revenue, cost of revenue and operating expenses;

forecasted capital expenditures and working capital needs;

weighted average cost of capital;

rates of long-term growth;

and income tax rates.

These estimates considered the recent deterioration in financial performance of the reporting units as well as the anticipated rate of recovery, and implied risk premiums based on the market prices of our equity and debt as of the assessment date.

The significant estimates used in the market multiple valuation approach include identifying business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples.

We did no t recognize any goodwill impairment in our North America or Asia Pacific reporting units.

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

As a result of the change in reporting units, we performed a qualitative assessment of potential goodwill impairment for the new International reporting unit and performed separate qualitative assessments of potential goodwill impairment for our Asia Pacific and EMEA reporting units immediately prior to the change.

Based on those assessments, which considered current market conditions and recent business performance, we determined that the likelihood of a goodwill impairment did not reach the more-likely-than-not threshold.

Accordingly, we concluded that goodwill relating to those reporting units was not impaired and further quantitative testing was not required to be performed.

We did not identify any other triggering events that required us to evaluate goodwill impairment in our North America or International reporting units during the remainder of 2020.

Additionally, we concluded that there was no goodwill impairment for either of our reporting units as a result of our annual goodwill impairment analysis.

Therefore, we did not recognize additional goodwill impairment for any of our reporting units during the year ended December 31, 2020.

There was no goodwill impairment for the years ended December 31, 2019 and 2018.

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The following table summarizes intangible assets as of December 31, 2020 and 2019 (in thousands):

December 31, 2019

December 31, 2018

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

December 31, 2020 December 31, 2019

Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value

Customer relationships $ — $ — $ — $ 16,200 $ 16,200 $ —

Merchant relationships 20,208 9,236 10,972 22,193 8,268 13,925

Trade names 9,651 7,921 1,730 9,558 7,369 2,189

Developed technology 2,121 1,863 258 3,651 2,685 966

Patents 10,813 4,697 6,116 23,021 18,167 4,854

Other intangible assets 17,823 6,748 11,075 26,115 12,757 13,358

Total $ 60,616 $ 30,465 $ 30,151 $ 100,738 $ 65,446 $ 35,292

Amortization of intangible assets is computed using the straight-line method over their estimated useful lives, which range from 1 to 10 years.

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As of December 31, 2020, our estimated future amortization expense related to intangible assets is as follows (in thousands):

Sale of Intangible Assets

In 2017, we sold customer lists and other intangible assets in certain food delivery markets to a subsidiary of Grubhub Inc.

We recognized a pretax gain on the sale of assets of $ 17.1 million , which represents the excess of the $ 19.8 million in net proceeds received, consisting of $ 20.0 million in cash less $ 0.2 million in transaction costs, over the $ 2.7 million net book value of the assets upon closing of the transaction.

See Note 15 , Restructuring , for additional information.

Thereafter 2,319

Total $ 30,151

GROUPON, INC.

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The following table summarizes investments as of December 31, 2020 and 2019 (dollars in thousands):

December 31, 2019

Percent Ownership of Voting Stock

December 31, 2018

Percent Ownership of Voting Stock

Available-for-sale securities - redeemable preferred shares

Fair value option investments

Other equity investments

December 31, 2020 Percent Ownership of Voting Stock December 31, 2019 Percent Ownership of Voting Stock

Available-for-sale securities - redeemable preferred shares $ — 19 % to 25 % $ — 19 % to 25 %

Fair value option investments — 10 % to 19 % 1,405 10 % to 19 %

Other equity investments 37,671 1 % to 19 % 75,171 1 % to 19 %

Total investments $ 37,671 $ 76,576

Available-for-Sale Securities

The following table summarizes amortized cost, gross unrealized gain (loss) and fair value of redeemable preferred shares as of December 31, 2019 and 2018 (in thousands):

Amortized cost

Gross unrealized gain (loss) in Accumulated other comprehensive income (loss)

We recorded $ 10.0 million , $ 5.6 million and $ 2.9 million of impairments of available-for-sale securities for the years ended December 31, 2019, 2018 and 2017 due to declines in the financial performance of the investee .

The fair value of redeemable preferred shares was $ 0.0 million as of December 31, 2020 and 2019.

We recorded $ 10.0 million and $ 5.6 million of impairments of available-for-sale securities for the years ended December 31, 2019 and 2018 due to declines in the financial performance of the investee.

Those impairments are classified within Other income (expense), net on the consolidated statements of operations.

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In connection with the dispositions of controlling stakes in Ticket Monster, an entity based in the Republic of Korea, and Groupon India in prior periods, we obtained minority investments in Monster Holdings LP ("Monster LP") and in Nearbuy Pte Ltd.

We have made an irrevocable election to account for both of those investments at fair value with changes in fair value reported in earnings.

We made an irrevocable election to account for both of those investments at fair value with changes in fair value reported in earnings.

We elected to apply fair value accounting to those investments because we believe that fair value is the most relevant measurement attribute for those investments, as well as to reduce operational and accounting complexity.

Our election to apply fair value accounting to those investments has and may continue to cause fluctuations in our earnings from period to period.

We determined that the fair value of our investments in Monster LP and Nearbuy was $ 0.0 million and $ 1.4 million as of December 31, 2019 , and $ 69.4 million and $ 4.5 million as of December 31, 2018 .

The following table summarizes gains and losses due to changes in fair value of those investments for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31,

2020 2019 2018

Monster LP $ — $ ( 69,408 ) $ ( 9,509 )

Nearbuy ( 1,405 ) ( 3,089 ) 445

Total $ ( 1,405 ) $ ( 72,497 ) $ ( 9,064 )

In 2015, we completed the sale of a controlling stake in Ticket Monster to an investor group, whereby we contributed all of the issued and outstanding share capital of Ticket Monster to Monster LP in exchange for Class B units of Monster LP, a newly-formed limited partnership, and $ 285.0 million in cash consideration.

In February 2017, we participated in a recapitalization transaction with Monster LP whereby it exchanged all of its Class B units for

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16,609,195 newly issued Class A-1 units.

In February 2017, we participated in a recapitalization transaction with Monster LP whereby it exchanged all of its Class B units for 16,609,195 newly issued Class A-1 units.

Upon closing of the transaction, we own 57 % of the outstanding Class A-1 units, which represents 9 % of the total outstanding partnership units.

Following the February 2017 recapitalization transaction, the Class A-1 units are entitled to an $ 150.0 million liquidation preference, including an $ 85.0 million liquidation preference attributable to the Class A-1 units held by us, which must be paid prior to any distributions to the holders of the Class A-2, Class B and Class C units.

Following the February 2017 recapitalization transaction, the Class A-1 units are entitled to a $ 150.0 million liquidation preference, including an $ 85.0 million liquidation preference attributable to the Class A-1 units held by us, which must be paid prior to any distributions to the holders of the Class A-2, Class B and Class C units.

Class A-1 unit holders are also entitled to share in distributions between $ 950.0 million and $ 1,494.0 million in accordance with the terms of Monster LP's distribution waterfall and in distributions in excess of $ 1,494.0 million based on their pro rata ownership of total outstanding partnership units.

As a result of the February 2017 recapitalization transaction, we currently hold an investment in the most senior equity units in Monster LP’s capital structure.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

However, while providing more downside protection, those Class A-1 units provide less opportunity for appreciation than the Class B units previously held by us.

During the first quarter of 2019, we recognized a $ 41.5 million loss from changes in the fair value of our investment in Monster LP due to the revised cash flow projections provided by TMON in March 2019 and an increase in the discount rate applied to those forecasts, which increased to 26.0 % as of March 31, 2019, as compared with 21.0 % as of December 31, 2018.

The increase in the discount rate applied as of March 31, 2019 was due to the deterioration in the financial condition of TMON and the competitive environment in the Korean e-commerce industry, which resulted in an increase to financial projection risk.

During the second quarter of 2019, we recognized an additional loss of $ 27.9 million from changes in the fair value of our investment in Monster LP due to revised financial projections provided by TMON in June 2019.

The revisions to the financial projections were made as a result of TMON’s continued underperformance as compared with prior projections along with adjustments to their business model.

The following tables summarize the condensed financial information for Monster LP as of December 31, 2019 and 2018 and for the years ended December 31, 2019 , 2018 and 2017 (in thousands):

Year Ended December 31,

Loss before income taxes

Current assets

Non-current assets

Current liabilities

Non-current liabilities

We determined that the fair value of our investment in Monster LP was $ 0.0 million as of December 31, 2020 and 2019.

In 2019 we recognized a $ 69.4 million loss from changes in the fair value of our investment in Monster LP mainly due to revised cash flow projections provided by Monster LP and an increase in the discount rate applied to those forecasts to 26.0 % as of March 31, 2019, as compared with 21.0 % as of December 31, 2018.

The revisions to the financial projections were made as a result of the deterioration in Ticket Monster's financial condition and continued underperformance compared with prior projections.

In 2015, Groupon India completed an equity financing transaction with a third-party investor that obtained a majority voting interest in the entity, whereby (a) the investor contributed $ 17.0 million in cash to Nearbuy, a newly formed Singapore-based entity, in exchange for Series A Preference Shares and (b) we contributed the shares of Groupon India to Nearbuy in exchange for seed preference shares of Nearbuy.

2 unchanged sentences

In December 2017, Nearbuy sold its subsidiary Nearbuy India Pte Ltd., which represented substantially all of its business operations, to a third-party investor in exchange for a minority investment in the acquirer.

During the fourth quarter of 2019, we recognized a $ 3.1 million loss from changes in the fair value of our investment in Nearbuy due to the revised cash flow projections provided in December 2019.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize the condensed financial information for Nearbuy as of December 31, 2019 and 2018 and for the years ended December 31, 2019 , 2018 and 2017 (in thousands):

Year Ended December 31,

Income (loss) before income taxes (1)

Net income (loss) (1)

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Nearbuy's income before income taxes and net income for the year ended December 31, 2017 includes a $ 22.6 million gain from the sale of its subsidiary Nearbuy India Pte Ltd.

We determined that the fair value of our investment in Nearbuy was $ 0.0 million as of December 31, 2020 and $ 1.4 million as of December 31, 2019.

During the first quarter 2020, we recognized a $ 1.4 million loss from changes in the fair value of our investment in Nearbuy due to revised cash flow projections and an increase in the discount rate applied to those forecasts, which increased to 30 % as of March 31, 2020, as compared with 20 % as of December 31, 2019.

The revisions to the financial projections and the increase in the discount rate applied as of March 31, 2020 were due to the deterioration in the financial condition of Nearbuy as a result of COVID-19, which resulted in underperformance as compared with prior projections and an increase to financial projection risk.

In 2019, we recognized a $ 3.1 million loss from changes in the fair value of our investment in Nearbuy due to revised cash flow projections.

Other Equity Investments

Other equity investments represent equity investments without readily determinable fair values.

Upon our adoption of ASU 2016-01 on January 1, 2018, we have elected to record equity investments without readily determinable fair values at cost adjusted for observable price changes and impairments.

We have elected to record equity investments without readily determinable fair values at cost adjusted for observable price changes and impairments.

The following table summarizes other equity investment activity for the years ended December 31, 2020 and 2019 (in thousands):

Balance as of December 31, 2018 $ 24,273

Transfer to other equity investment upon conversion of convertible debt security

Impairment of investment included in earnings

Upward adjustments for observable price changes

Foreign currency translation

Balance as of December 31, 2019 $ 75,171

Upward adjustments for observable price changes

Impairment of investments included in earnings ( 6,684 )

Foreign currency translation

Balance as of December 31, 2020 $ 37,671

We adjusted the carrying value of an other equity investment due to observable price changes in orderly transactions that occurred during the fourth quarter of 2019, which resulted in an unrealized gain of $ 51.4 million .

That gain is included within Other income (expense), net on the consolidated statements of operations for the year ended December 31, 2019.

During the fourth quarter of 2019, we also identified buyers for 50 % of our shares in that investment for an agreed-upon purchase price of $ 34.0 million which approximated the cost adjusted for observable price changes as of December 31, 2019.

Refer to Note 23 , Subsequent Events , for additional information on the closing of that sale in January 2020.

In July 2017, we sold an other equity investment for total cash consideration of $ 16.0 million .

We recognized a pretax gain on the disposition of $ 7.6 million , which is classified within Other income (expense), net on the consolidated statement of operations.

In March 2017, in connection with the disposition of Groupon Israel, we retained a minority investment in the entity.

The investment was recorded at its $ 0.4 million fair value at initial recognition and is accounted for as an other equity investment.

In the first quarter 2020, we recorded a $ 6.7 million impairment to an other equity method investment as a result of revised cash flow projections and a deterioration in financial condition due to COVID-19.

This impairment is classified within Other income (expense), net on the consolidated statements of operations.

We did not recognize any other impairments to other equity investments during the year ended December 31, 2020.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In the fourth quarter 2019, we adjusted the carrying value of an other equity investment due to observable price changes in orderly transactions, which resulted in an unrealized gain of $ 51.4 million.

This unrealized gain is classified within Other income (expense), net on the consolidated statements of operations for the year ended December 31, 2019.

During the first quarter 2020, we sold 50 % of our shares in that investment for total cash consideration of $ 34.0 million, which approximated the cost adjusted for observable price changes as of December 31, 2019.

For the year ended December 31, 2018, we recorded a $ 4.6 million impairment of an other equity investment.

This impairment is classified within Other income (expense), net on the consolidated statements of operations.

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS INFORMATION

1 unchanged sentence

Year Ended December 31,

2020 2019 2018

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

1 unchanged sentence

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

Gain (loss) on sale of investment

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

1 unchanged sentence

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

Other 43 ( 459 ) 2,026

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

3 unchanged sentences

Income taxes receivable 5,437 4,791

Other 15,686 24,779

Total prepaid expenses and other current assets $ 40,441 $ 82,073

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes other non-current assets as of December 31, 2020 and December 31, 2019 (in thousands):

Deferred income tax $ 11,593 $ 4,829

Debt issue costs, net 1,852 2,156

Deferred contract acquisition costs 5,315 10,133

Deferred cloud implementation costs (1)

Other 5,165 4,115

Total other non-current assets $ 34,327 $ 28,605

(1) Following our review of long-lived assets for impairment in the first quarter of 2020, as described in Note 3, COVID-19 Pandemic , we recognized $ 0.9 million of long-lived asset impairments related to our EMEA operations, which is included in Other non-current assets.

See Note 3, COVID-19 Pandemic , for more information.

The following table summarizes accrued merchant and supplier payables as of December 31, 2020 and 2019 (in thousands):

1 unchanged sentence

Accrued supplier payables (1)

107,703 174,367

Total accrued merchant and supplier payables $ 410,963 $ 540,940

6 unchanged sentences

Accrued marketing 15,299 41,110

Restructuring-related liabilities 13,746 —

Customer credits 61,006 13,764

1 unchanged sentence

Deferred revenue 11,223 17,951

Current portion of lease obligations (1)

Deferred payroll taxes (1)

Operating and finance lease obligations 37,755 40,768

Deferred cloud computing contract incentive 3,000 —

Other 54,055 70,544

Total accrued expenses and other current liabilities $ 294,999 $ 260,192

Current portion of lease obligations as of December 31, 2019 includes $ 25.0 million of additional lease obligations that were recognized on January 1, 2019 as a result of the adoption of Topic 842.

Refer to Note 10 , Leases , for additional information.

(1) We have elected to defer certain payroll taxes under the Coronavirus Aid, Relief and Economic Security ("CARES") Act.

These amounts are due by December 31, 2021.

The following table summarizes other non-current liabilities as of December 31, 2020 and 2019 (in thousands):

Contingent income tax liabilities $ 25,593 $ 30,121

Deferred rent (1)

Finance lease obligations 730 5,831

Restructuring-related liabilities 385 —

Deferred income taxes 3,170 3,903

Deferred payroll taxes (1)

Deferred cloud computing contract incentive 4,250 —

Other 7,378 5,132

Total other non-current liabilities $ 44,428 $ 44,987

Non-current operating lease liabilities as of December 31, 2019 are included within Operating lease obligations on the consolidated balance sheet as a result of the adoption of Topic 842 on January 1, 2019.

Refer to Note 10 , Leases , for additional information.

(1) We have elected to defer certain payroll taxes under the Coronavirus Aid, Relief and Economic Security ("CARES") Act.

These amounts are due by December 31, 2022.

GROUPON, INC.

1 unchanged sentence

The following table summarizes the activity for accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Foreign currency translation adjustments

Unrealized gain (loss) on available-for-sale securities

Pension adjustments

Foreign currency translation adjustments Unrealized gain (loss) on available-for-sale securities Total

Balance as of December 31, 2017 $ 30,962 $ 882 $ 31,844

2 unchanged sentences

Other comprehensive income (loss) 3,332 ( 735 ) 2,597

Reclassification for impact of U.S.

tax rate change — 161 161

Balance as of December 31, 2018 34,294 308 34,602

2 unchanged sentences

Other comprehensive income (loss) 4,858 ( 379 ) 4,479

Reclassification for impact of U.S.

tax rate change

Balance as of December 31, 2019 39,152 ( 71 ) 39,081

3 unchanged sentences

Balance as of December 31, 2020 $ 3,180 $ ( 71 ) $ 3,109

The effects of amounts reclassified from accumulated other comprehensive income (loss) to net income (loss) for the years ended December 31, 2019 , 2018 and 2017 are presented within the following line items in the consolidated statements of operations (in thousands):

Year Ended December 31,

Consolidated Statements of Operations Line Item

Foreign currency translation adjustments

Loss (gain) on country exits - continuing operations

Other income (expense), net

Loss (gain) on dispositions - discontinued operations

Income (loss) from discontinued operations, net of tax

Reclassification adjustments

Unrealized gain (loss) on available-for-sale securities

Other-than-temporary impairment of available-for-sale security

Other income (expense), net

Realized (gain) loss on investment

Other income (expense), net

Reclassification adjustment

Pension adjustments

Curtailment gain

Selling, general and administrative

Amortization of net actuarial loss (gain)

Selling, general and administrative

Reclassification adjustment

Total reclassification adjustments

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FINANCING ARRANGEMENTS

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The Indenture includes customary events of default.

If an event of default, as defined in the Indenture, occurs and is continuing, the principal amount of the Notes and any accrued and unpaid interest may be declared immediately due and payable.

If an event of default, as defined in the Indenture, occurs and is continuing, the principal amount of the Notes and any accrued and unpaid interest may be declared

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

immediately due and payable.

In the case of bankruptcy or insolvency, the principal amount of the Notes and any accrued and unpaid interest would automatically become immediately due and payable.

8 unchanged sentences

Transaction costs attributable to the equity component of $ 2.0 million were recorded in stockholders' equity as a reduction of the equity component.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The carrying amount of the Notes consisted of the following as of December 31, 2020 and 2019 (in thousands):

9 unchanged sentences

Year Ended December 31,

2020 2019 2018

Contractual interest ( 3.25 % of the principal amount per annum)

$ 8,128 $ 8,128 $ 8,128

Amortization of debt discount 14,621 13,200 11,916

Total $ 22,749 $ 21,328 $ 20,044

Note Hedges and Warrants

4 unchanged sentences

Holders of the Notes do not have any rights with respect to the convertible note hedges.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In May 2016, we also sold warrants for total cash proceeds of $ 35.5 million to certain bank counterparties.

8 unchanged sentences

However, upon conversion, there will be no economic dilution from the Notes, as exercise of the convertible note hedges eliminates any dilution from the Notes that would have otherwise occurred when the price of our common stock exceeds the conversion price.

Taken together, the purchase of the convertible note hedges and

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

sale of warrants are intended to offset any actual dilution from the conversion of the Notes and to effectively increase the overall conversion price from $ 5.40 to $ 8.50 per share.

Taken together, the purchase of the convertible note hedges and sale of warrants are intended to offset any actual dilution from the conversion of the Notes and to effectively increase the overall conversion price from $ 108.00 to $ 170.00 per share.

Revolving Credit Agreement

In May 2019, we entered into a second amended and restated senior secured revolving credit agreement (the "2019 Credit Agreement") which provides for aggregate principal borrowings of up to $ 400.0 million and matures in May 2024.

The 2019 Credit Agreement replaced our previous $ 250.0 million amended and restated credit agreement (the "2016 Credit Agreement").

We deferred debt issuance costs of $ 2.4 million related to the 2019 Credit Agreement.

Those deferred costs are included within Other non-current assets on the consolidated balance sheet as of December 31, 2019 and will be amortized to interest expense over the term of the agreement.

Borrowings under the 2019 Credit Agreement bear interest, at our option, at a rate per annum equal to (a) an adjusted LIBO rate or (b) a customary base rate (with loans denominated in certain currencies bearing interest at rates specific to such currencies) plus an additional margin ranging between 0.50 % and 2.00 % .

We are required to pay quarterly commitment fees ranging from 0.25 % to 0.35 % per annum of the average daily amount of unused commitments available under the 2019 Credit Agreement.

The 2019 Credit Agreement also provides for the issuance of up to $ 75.0 million in letters of credit, provided that the sum of outstanding borrowings and letters of credit do not exceed the maximum funding commitment of $ 400.0 million .

The 2019 Credit Agreement is secured by substantially all of our tangible and intangible assets, including a pledge of 100 % of the outstanding capital stock of substantially all of our direct and indirect domestic subsidiaries and 65 % of the shares or equity interests of first-tier foreign subsidiaries and each U.S.

entity whose assets substantially consist of capital stock and/or intercompany debt of one or more foreign subsidiaries, subject to certain exceptions.

Certain of our domestic subsidiaries are guarantors under the 2019 Credit Agreement.

The 2019 Credit Agreement contains various customary restrictive covenants that limit our ability to, among other things:

In May 2019, we entered into a second amended and restated senior secured revolving credit agreement which provided for aggregate principal borrowings of up to $ 400.0 million (prior to the Amendment described below) and matures in May 2024.

In July 2020, we entered into an amendment to the revolving credit agreement (the "Amendment" and the revolving credit agreement as amended, the "Amended Credit Agreement") in order to provide us with operational flexibility and covenant relief through the end of the first quarter of 2021 (the "Suspension Period") in light of the ongoing impacts of COVID-19 on our business.

In addition to the covenant relief described below, the Amendment permanently reduces borrowing capacity under our senior secured revolving credit facility from $ 400.0 million to $ 225.0 million.

We deferred debt issuance costs of $ 3.2 million as a result of entering into the Amended Credit Agreement.

Deferred debt issuance costs are included within Other non-current assets on the consolidated balance sheet as of December 31, 2020 and are amortized to interest expense over the term of the respective agreement.

Pursuant to the Amendment, during the Suspension Period, the Company will be exempt from certain covenant restrictions, namely the requirements to maintain a maximum funded indebtedness to EBITDA ratio, a maximum senior secured indebtedness to EBITDA ratio, a minimum fixed charge coverage ratio, unrestricted cash of not less than $ 250.0 million and a minimum liquidity balance (including any undrawn amounts under the credit facility) of at least 70 % of our accrued merchant and supplier payables balance (collectively, the "Existing Financial Covenants").

Additionally, the Amendment provides that, during the Suspension Period, we will be required to maintain specified minimum quarterly EBITDA levels and to maintain a monthly minimum liquidity balance (including any undrawn amounts under the credit facility) of at least 100 % of our accrued merchant and supplier payables balance for such month plus $ 50.0 million.

Following the Suspension Period, we will be subject to the Existing Financial Covenants.

In addition, under the Amended Credit Agreement, we are subject to various covenants, including customary restrictive covenants that limit our ability to, among other things:

incur additional indebtedness;

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engage in mergers, consolidations, liquidations or dissolutions;

and engage in transactions with affiliates.

The 2019 Credit Agreement requires us to maintain compliance with specified financial covenants, comprised of a minimum fixed charge coverage ratio, a maximum leverage ratio, a maximum senior secured leverage ratio and a minimum liquidity ratio, each as set forth in the 2019 Credit Agreement.

We are also required to maintain, as of the last day of each fiscal quarter, unrestricted cash of at least $ 250.0 million , including $ 125.0 million in accounts held with lenders under the 2019 Credit Agreement or their affiliates.

Non-compliance with these covenants may result in termination of the commitments under the 2019 Credit Agreement and any then outstanding borrowings may be declared due and payable immediately.

We have the right to terminate the 2019 Credit Agreement or reduce the available commitments at any time.

As of December 31, 2019 and 2018, we had no borrowings outstanding under the respective credit agreements.

As of December 31, 2019 and 2018, we had outstanding letters of credit of $ 18.1 million and $ 19.2 million under the 2019 Credit Agreement and 2016 Credit Agreement, respectively.

and engage in transactions with related parties and other affiliates.

The Amendment further restricts certain of these negative covenants during the Suspension Period, including our ability to make share repurchases, acquisitions, investments and to incur additional indebtedness and liens.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Non-compliance with the covenants under the Amended Credit Agreement may result in termination of the commitments thereunder and any then outstanding borrowings may be declared due and payable immediately.

We have the right to terminate the Amended Credit Agreement or reduce the available commitments at any time.

The Amendment also increases interest rates through the end of the first quarter of 2021, raising the alternative base rate and Canadian prime spreads to 1.50 %, the fixed rate spreads to 2.50 % and the commitment fee to 0.4 % on the daily amount of the unused commitments under the Amended Credit Agreement.

Following the Suspension Period, the applicable spread and commitment fee will revert to pre-Amendment levels, which provides for (a) interest at a rate per annum equal to (i) an adjusted LIBO rate or (ii) a customary base rate (with loans denominated in certain currencies bearing interest at rates specific to such currencies) plus an additional margin ranging between 0.50 % and 2.00 % and (b) commitment fees ranging from 0.25 % to 0.35 % on the daily amount of unused commitments.

The Amended Credit Agreement also provides for the issuance of up to $ 75.0 million in letters of credit, provided that the sum of outstanding borrowings and letters of credit do not exceed the maximum funding commitment of $ 225.0 million.

The Amended Credit Agreement is secured by substantially all of our tangible and intangible assets, including a pledge of 100 % of the outstanding capital stock of substantially all of our direct and indirect domestic subsidiaries and 65 % of the shares or equity interests of first-tier foreign subsidiaries and each U.S.

entity whose assets substantially consist of capital stock and/or intercompany debt of one or more foreign subsidiaries, subject to certain exceptions.

Certain of our domestic and foreign subsidiaries are guarantors under the Amended Credit Agreement.

We had $ 200.0 million of borrowings and $ 20.6 million of outstanding letters of credit under the Amended Credit Agreement as of December 31, 2020.

We had no borrowings and $ 18.1 million of outstanding letters of credit under the credit agreement as of December 31, 2019.

Adoption of ASC Topic 842, Leases

On January 1, 2019, we adopted ASC Topic 842 using the modified retrospective transition method.

Topic 842 requires the recognition of lease assets and liabilities for operating leases, in addition to the finance lease assets and liabilities previously recorded on our consolidated balance sheets.

As a result of adopting Topic 842, we recognized additional lease assets and liabilities of $ 109.6 million as of January 1, 2019.

The discount rate used to calculate that adjustment was the rate implicit in the lease, unless that rate was not readily determinable.

For leases for which the rate was not readily determinable, the discount rate used was our incremental borrowing rate as of the adoption date, January 1, 2019.

There was no cumulative effect adjustment to our accumulated defi cit as a result of initially applying the guidance.

Additionally, we elected to not separate lease and non-lease components for all of our leases.

Aside from the impact to our consolidated balance sheet discussed in Note 2, Summary of Significant Accounting Policies , lease presentation within the consolidated statements of operations and consolidated statements of cash flows are substantially consistent with historical treatment.

General Description of Leases

We have entered into various non-cancelable operating lease agreements for our offices and data centers and non-cancelable finance lease agreements for property and equipment.

We classify leases at their commencement as either operating or finance leases.

We may receive renewal or expansion options, rent holidays, leasehold improvements or other incentives on certain lease agreements.

Our operating leases primarily consist of leases for real estate throughout the world with lease expirations between 2021 and 2027.

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We account for the 600 West Chicago lease as an operating lease and recognize rent expense on a straight-line basis, taking into account rent escalations and lease incentives.

For more information about our lease accounting policies, including lease recognition policy and significant assumptions and judgments used, refer to Note 2 , Summary of Significant Accounting Policies .

We sublease a portion of our office space at 600 West Chicago to Uptake, Inc., a Lightbank LLC portfolio company as a related party transaction.

The sublease was a market rate transaction on terms that we believe are no less favorable than would have been reached with an unrelated party.

The sublease extends through January 31, 2026 and sublease rentals over the entire term total $ 18.2 million.

For more information about our lease accounting policies, including lease recognition policy and significant assumptions and judgments used, see Note 2, Summary of Significant Accounting Policies .

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following summarizes right-of-use assets as of December 31, 2019 (in thousands):

December 31, 2019

The following summarizes right-of-use assets as of December 31, 2020 and 2019 (in thousands):

December 31, 2020 December 31, 2019

Right-of-use assets - operating leases $ 107,509 $ 133,832

Right-of-use assets - finance leases (1)

21,523 28,193

Total right-of-use assets, gross 129,032 162,025

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(1) Right-of-use assets for finance leases are included in Property, equipment and software, net on the consolidated balance sheet.

The following table summarizes our lease cost and sublease income for the year ended December 31, 2019 (in thousands):

Due to the triggering event and subsequent review of long-lived assets for impairment in the first quarter of 2020, as described in Note 3, COVID-19 Pandemic , we recognized a long-lived asset impairment of $ 10.5 million related to right-of-use assets - operating leases and $ 1.3 million related to right-of-use assets - finance leases within our International segment related to our EMEA operations, which are presented in Long-lived asset impairments on the consolidated statements of operations.

Due to actions taken under our restructuring plan, we recognized long-lived asset impairments of $ 16.0 million related to right-of-use assets - operating leases for the year ended December 31, 2020, which is presented in Restructuring and related charges on the consolidated statements of operations.

The following table summarizes our lease costs and sublease income for the year ended December 31, 2020 and 2019 (in thousands):

Year Ended December 31,

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Operating lease cost (1) (2)

30,870 34,397

Variable lease cost (3)

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Sublease income, gross (4)

( 4,693 ) ( 5,045 )

Total lease cost $ 41,892 $ 58,211

Rent expense under operating leases was $ 40.1 million and $ 42.5 million for the years ended December 31, 2018 and 2017.

Sublease income was $ 6.5 million and $ 7.1 million for the years ended December 31, 2018 and 2017.

(1) Rent expense under operating leases was $ 40.1 million for the year ended December 31, 2018.

(2) Operating lease costs presented as Selling, general and administrative and Restructuring and related charges totaled $ 23.1 million and $ 7.8 million in the consolidated statements of operations for the year ended December 31, 2020.

(3) Variable lease costs presented as Selling, general and administrative and Restructuring and related charges totaled $ 7.0 million and $ 1.1 million in the consolidated statements of operations for the year ended December 31, 2020.

(4) Sublease income, gross presented as Selling, general and administrative and Restructuring and related charges totaled $ 1.2 million and $ 3.5 million in the consolidated statements of operations for the year ended December 31, 2020.

Sublease income was $ 6.5 million for the year ended December 31, 2018.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2020, the future payments under finance leases and operating leases for each of the next five years and thereafter are as follows (in thousands):

Finance Leases

Operating Leases

Finance Leases Operating Leases

2021 $ 4,717 $ 38,690

2022 715 35,451

2023 12 27,025

2024 — 19,599

2025 — 16,175

Thereafter — 1,701

Total minimum lease payments 5,444 138,641

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Total long-term lease obligations $ 730 $ 90,927

As of December 31, 2019, we also had $ 12.3 million of non-cancelable operating lease commitments for offices that have not yet commenced.

These operating leases will commence in 2020 with lease terms of 3 years to 5 years .

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2018, the future payments under lease agreements in accordance with our historical accounting policies under Topic 840 were as follows (in thousands):

Capital Leases

Operating Leases

Total minimum lease payments

Amount representing interest

Present value of net minimum capital lease payments

Current portion of capital lease obligations

Total long-term capital lease obligations

As of December 31, 2020, we do not have any non-cancelable operating lease commitments that have not yet commenced.

As of December 31, 2020, the future amounts due under subleases for each of the next five years and thereafter are as follows (in thousands):

Thereafter 197

Total future sublease income $ 19,445

The discount rate used for our lease obligations as of both December 31, 2019 and January 1, 2019 ranged from 1.5 % to 6.9 % .

As of December 31, 2019 , the weighted-average remaining lease term and weighted-average discount rate for our finance leases and operating leases was as follows:

Finance Leases

Operating Leases

Weighted-average lease term

As of December 31, 2020, the weighted-average remaining lease term and weighted-average discount rate for our finance leases and operating leases were as follows:

Finance Leases Operating Leases

Weighted-average lease term 1 year 4 years

Weighted-average discount rate 5.4 % 5.4 %

The following table summarizes supplemental cash flow information on our leasing obligations for the year ended December 31, 2019 (in thousands):

Year Ended December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases

Operating cash flows from operating leases

Financing cash flows from finance leases

Right-of-use assets obtained in exchange for lease liabilities:

Finance leases

Operating leases

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

COMMITMENTS AND CONTINGENCIES

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As of December 31, 2020, future payments under these contractual obligations were as follows (in thousands):

2021 $ 27,365

Total purchase obligations $ 82,567

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Legal Matters and Other Contingencies

From time to time, we are party to various legal proceedings incident to the operation of our business.

For example, we currently are involved in proceedings brought by former employees and merchants, intellectual property infringement suits, customer lawsuits, consumer class actions and suits alleging, among other things, violations of state consumer protection or privacy laws.

For example, we currently are involved in proceedings brought by merchants, employment and related matters, intellectual property infringement suits, customer lawsuits, stockholder claims relating to U.S.

securities law, consumer class actions and suits alleging, among other things, violations of state consumer protection or privacy laws.

On April 28, 2020, an individual plaintiff filed a securities fraud class action complaint in the United States District Court for the Northern District of Illinois, and in July 2020, another individual was appointed as lead plaintiff.

The lawsuit covers the time period from July 30, 2019 through February 18, 2020.

The lead plaintiff alleges that Groupon and certain of its officers made materially false and/or misleading statements or omissions regarding its business, operations and prospects, specifically as it relates to reiterating its full year guidance on November 4, 2019 and the Groupon Select program.

Groupon filed a motion to dismiss the complaint in this matter and is awaiting a ruling by the court.

We intend to vigorously defend against these allegations, which we believe to be without merit.

In addition, third parties have from time to time claimed, and others may claim in the future, that we have infringed their intellectual property rights.

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We may also become more vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act are interpreted by the courts, and we become subject to laws in jurisdictions where the underlying laws with respect to the potential liability of online intermediaries are either unclear or less favorable.

We believe that additional lawsuits alleging that we have violated patent, copyright or trademark laws will be filed against us.

We believe that additional lawsuits alleging that we have violated patent, copyright or trademark laws may be filed against us.

Intellectual property claims, whether meritorious or not, are time consuming and often costly to resolve, could require expensive changes in our methods of doing business or the goods we sell, or could require us to enter into costly royalty or licensing agreements.

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We are also subject to, or in the future may become subject to, a variety of regulatory inquiries, audits, and investigations across the jurisdictions where we conduct our business, including, for example, inquiries related to consumer protection, employment matters and/or hiring practices, marketing practices, tax, unclaimed property and privacy rules and regulations.

Any regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, damage awards, fines and penalties, injunctive relief or increased costs of doing business through adverse judgment or settlement, require us to change our business practices in expensive ways, require significant amounts of management time, result in the diversion of significant operational resources or otherwise harm our business.

We establish an accrued liability for loss contingencies related to legal and regulatory matters when the loss is both probable and reasonably estimable.

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For certain of the matters described above, there are inherent and significant uncertainties based on, among other factors, the stage of the proceedings, developments in the applicable facts of law, or the lack of a specific damage claim.

However, we believe

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

that the amount of reasonably possible losses in excess of the amounts accrued for those matters would not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.

However, we believe that the amount of reasonably possible losses in excess of the amounts accrued for those matters would not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.

Our accrued liabilities for loss contingencies related to legal and regulatory matters may change in the future as a result of new developments, including, but not limited to, the occurrence of new legal matters, changes in the law or regulatory environment, adverse or favorable rulings, newly discovered facts relevant to the matter, or changes in the strategy for the matter.

Regardless of the outcome, litigation and other regulatory matters can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Indemnifications

In connection with the disposition of our operations in Latin America in the first quarter of 2017 (see Note 3 , Discontinued Operations ), we recorded $ 5.4 million in indemnification liabilities for certain tax and other matters upon the closing of the transactions as an adjustment to the net loss on the dispositions within discontinued operations at their fair value.

In connection with the disposition of our operations in Latin America in 2017, we recorded $ 5.4 million in indemnification liabilities for certain tax and other matters upon the closing of the transactions as an adjustment to the net loss on the dispositions within discontinued operations at their fair value.

We estimated the indemnification liabilities using a probability-weighted expected cash flow approach.

In 2019, we decreased our indemnification liabilities due to the expiration of certain indemnification obligations.

The resulting benefit of $ 2.2 million is recorded within Income (loss) from discontinued operations on the consolidated statement of operations for the year ended December 31, 2019 .

In 2020 and 2019, we decreased our indemnification liabilities due to the expiration of certain indemnification obligations.

The resulting benefit of $ 0.4 million and $ 2.2 million is recorded within Income (loss) from discontinued operations on the consolidated statements of operations for the years ended December 31, 2020 and 2019.

Our remaining indemnification liabilities were $ 2.8 million as of December 31, 2020.

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STOCKHOLDERS' EQUITY

Reverse Stock Split

On June 9, 2020, our stockholders approved amendments to our Restated Certificate of Incorporation to effect a reverse stock split of our shares of common stock, and our Board approved a final reverse stock split ratio of 1-for-20 and a corresponding reduction in the number of authorized shares of our common stock.

The reverse stock split became effective on June 10, 2020.

On the effective date, every 20 shares of issued and outstanding common stock were combined and converted into one issued and outstanding share of common stock.

The number of authorized shares of Common Stock was reduced proportionately.

Fractional shares were cancelled and stockholders received cash in lieu thereof and the par value per share of common stock remains unchanged.

A proportionate adjustment was also made to the maximum number of shares of common stock issuable under the Groupon, Inc.

Stock Plans (the "Plans"), and the Groupon, Inc.

2012 Employee Stock Purchase Plan, as amended ("ESPP").

As a result, the number of shares and income (loss) per share disclosed throughout this Annual Report on Form 10-K have been retrospectively adjusted to reflect the reverse stock split.

Preferred Stock

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As of December 31, 2020 and 2019, there were no shares of preferred stock outstanding.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Pursuant to our restated certificate of incorporation, the Board has the authority to issue up to a total of 100,500,000 shares of common stock.

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In May 2018, the Board 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

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

purchase price of $ 45.2 million (including fees and commissions) under our repurchase program.

During the year ended December 31, 2020, we did not repurchase any shares under the 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 share repurchase 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 share repurchase program may be terminated at any time.

COMPENSATION ARRANGEMENTS

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Year Ended December 31,

2020 2019 2018

Cost of revenue $ 662 $ 1,482 $ 1,485

Marketing 1,522 5,809 6,948

Selling, general and administrative 36,826 74,324 56,288

Restructuring charges

Restructuring and related charges 1,735 — —

Other income (expense), net — — 100

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We capitalized $ 4.5 million, $ 7.1 million and $ 7.4 million of stock-based compensation for the years ended December 31, 2020, 2019 and 2018, in connection with internally-developed software and cloud computing arrangements.

We recognized stock-based compensation from discontinued operations of $ 0.2 million for the year ended December 31, 2017.

Employee Stock Purchase Plan

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The table below summarizes restricted stock unit activity under the Plans for the year ended December 31, 2020:

Restricted Stock Units

Weighted- Average Grant Date Fair Value (per share)

Restricted Stock Units Weighted- Average Grant Date Fair Value (per share)

Unvested at December 31, 2019 $ 1,527,014 $ 74.80

Granted 1,836,665 24.92

Vested ( 679,944 ) 72.25

Forfeited ( 830,728 ) 62.48

Unvested at December 31, 2020 $ 1,853,007 $ 31.91

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We grant performance share units under the Plans that vest in shares of our common stock upon the achievement of financial and operational targets specified in the respective award agreement ("Performance Share Units").

For the year ended December 31, 2019 , we granted performance share units that will vest if our average daily closing stock price is equal to or greater than $ 6.00 per share over a period of 30 consecutive trading days prior to December 31, 2022 or if a change in control occurs during the performance period at the specified stock price (and on a proportional basis for a change in control price between the grant date price and the specified stock price) ("Market-based Performance Share Units").

We determined these awards are subject to a market condition, and therefore we used a Monte Carlo simulation to calculate the grant date fair value of the awards and the related derived service period over which we will recognize the expense.

During the year ended December 31, 2019, we also granted performance share units subject to a market condition ("Market-based Performance Share Units").

The Market-based Performance Share Units will vest if our average daily closing stock price is equal to or greater than $ 120.00 per share over a period of 30 consecutive trading days prior to December 31, 2022 or if a change in control occurs during the performance period at the specified stock price (and on a proportional basis for a change in control price between the grant date price and the specified stock price).

We used a Monte Carlo simulation to calculate the grant date fair value of the awards and the related derived service period over which we recognized the expense.

The key inputs used in the Monte Carlo simulation were the risk-free rate, our volatility of 49.8 % and our cost of equity of 12.8 %.

All of our performance share awards are subject to both continued employment through the performance period dictated by the award and certification by the Compensation Committee that the specified performance conditions have been achieved.

Our Performance Share Units and Market-based Performance Share Units are subject to continued employment through the performance period dictated by the award and certification by the Compensation Committee that the specified performance conditions have been achieved.

The table below summarizes Performance Share Unit activity under the Plans for the year ended December 31, 2020:

Performance Share Units

Weighted-Average Grant Date Fair Value (per unit)

Market-based Performance Share Units

Weighted-Average Grant Date Fair Value (per unit)

Performance Share Units Weighted-Average Grant Date Fair Value (per unit) Market-based Performance Share Units Weighted-Average Grant Date Fair Value (per unit)

Unvested at December 31, 2019 203,853 $ 79.76 341,002 $ 60.60

Granted 96,598 15.44 — —

Vested ( 104,441 ) 80.77 — —

Forfeited ( 71,301 ) 79.91 ( 283,334 ) 60.60

Unvested at December 31, 2020 124,709 $ 29.73 57,668 $ 60.60

Maximum shares issuable upon vesting at December 31, 2020

173,008 57,668

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2019 , $ 5.6 million of unrecognized compensation costs related to unvested performance share units are expected to be recognized over a remaining weighted-average period of 2.26 years and $ 3.1 million of unrecognized compensation costs related to unvested market-based performance share units are expected to be recognized over a remaining weighted-average period of 0.16 years .

Restricted Stock Awards

We previously granted restricted stock awards in connection with business combinations.

Compensation expense on those awards was recognized on a straight-line basis over the requisite service periods of the awards.

During the year ended December 31, 2017 , 1.2 million restricted shares with a fair value of 5.2 million vested.

There were no restricted shares outstanding as of December 31, 2017 .

No Restricted stock awards were granted, vested or forfeited in the years ended December 31, 2019 and 2018 .

Stock Options

The exercise price of stock options granted is equal to the fair value of the underlying stock on the date of grant.

The contractual term for stock options expires ten years from the grant date.

Stock options generally vested over a three - or four -year period, with 25 % of the awards vesting after one year and the remainder of the awards vesting on a monthly or quarterly basis thereafter.

The table below summarizes the stock option activity for the year ended December 31, 2019 :

Weighted- Average Exercise Price

Weighted- Average Remaining Contractual Term (in years)

Aggregate Intrinsic Value

(in thousands) (1)

Outstanding and exercisable at December 31, 2018

Outstanding and exercisable at December 31, 2019

The aggregate intrinsic value of options outstanding and exercisable represents the total pretax intrinsic value (the difference between the fair value of our stock on the last day of each period and the exercise price, multiplied by the number of options where the fair value exceeds the exercise price) that would have been received by the option holders had all option holders exercised their options as of December 31, 2019 and 2018 , respectively.

We did not grant any stock options during the years ended December 31, 2019 , 2018 and 2017 .

The total intrinsic value of options that were exercised during the years ended December 31, 2019 , 2018 and 2017 was $ 0.1 million , $ 3.2 million and $ 4.0 million .

As of December 31, 2020, $ 1.3 million of unrecognized compensation costs related to unvested Performance Share Units are expected to be recognized over a remaining weighted-average period of 1.54 years.

We have recognized all compensation costs related to our unvested Market-Based Performance Share Units .

REVENUE RECOGNITION

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Local, Goods and Travel.

Refer to Note 20 , Segment Information , for revenue summarized by reportable segment and category.

Product revenue is earned from direct sales of merchandise inventory to customers through our Goods category and includes any related shipping fees.

Service revenue primarily represents the net commissions earned from 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 marketplace that can be redeemed by the customer with a third-party merchant for goods or services (or for discounts on goods or services).

To a lesser extent, service revenue also includes commissions earned when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications.

See , Note 21, Segment Information , for revenue summarized by reportable segment and category.

In connection with most of our product and service revenue transactions, we collect cash from credit card payment processors shortly after a sale occurs.

For transactions in which we earn commissions when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications, we generally collect payment from affiliate networks on terms ranging from 30 to 150 days.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On January 1, 2018, we adopted ASC Topic 606 using the modified retrospective method.

The adoption of Topic 606 did not significantly impact our presentation of revenue on a gross or net basis.

Refer to Note 2 , Summary of Significant Accounting Policies , for additional information about our revenue recognition accounting policies and the impact of adopting Topic 606.

Contract Balances

A substantial majority of our deferred revenue relates to product sales for which revenue will be recognized as the products are delivered to customers, generally within one week following the balance sheet date.

Our deferred revenue was $ 18.0 million , $ 25.5 million and $ 25.8 million as of December 31, 2019 , December 31, 2018 and January 1, 2018.

The amount of revenue recognized for the years ended December 31, 2019 and 2018 that was included in the deferred revenue balance at the beginning of the period was $ 25.4 million and $ 25.1 million .

Our deferred revenue was $ 11.2 million as of December 31, 2020.

As of December 31, 2019 and 2018, our deferred revenue was $ 18.0 million and $ 25.5 million, all of which was recognized during the years ended December 31, 2020 and 2019, respectively.

Customer Credits

We issue credits to customers that can be applied to future purchases through our online marketplaces.

Credits are primarily issued as consideration for refunds.

To a lesser extent, credits are issued for customer relationship purposes.

The following table summarizes the activity in the liability for customer credits for the years ended December 31, 2020 and 2019 (in thousands):

Customer Credits

Balance as of January 1, 2018

Balance as of December 31, 2018 $ 15,118

Credits issued 115,031

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Balance as of December 31, 2020 $ 61,006

Customer credits can be redeemed through our online marketplaces for goods or services provided by a third-party merchant or for merchandise inventory sold by us.

When customer credits are redeemed for merchandise inventory sold by us, product revenue is recognized on a gross basis equal to the amount of the customer credit liability derecognized.

Customer credits are primarily used within one year of issuance.

Cost of Obtaining Contracts

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Other non-current assets 5,315 10,133

For the years ended December 31, 2019 and 2018, we amortized $ 20.4 million and $ 25.2 million of deferred contract acquisition costs and did not recognize any impairment losses in relation to the deferred costs.

RESTRUCTURING

In September 2015, we commenced a restructuring plan relating primarily to workforce reductions in our international operations.

We have also undertaken workforce reductions in our North America segment.

In addition to workforce reductions in our ongoing markets, we ceased operations in 17 countries within our International segment as part of the restructuring plan between September 2015 and March 2016.

Those country exits, which generally comprised our smallest international markets, resulted from a series of separate decisions made at different times

For the years ended December 31, 2020, 2019 and 2018, we amortized $ 15.3 million, $ 20.4 million and $ 25.2 million of deferred contract acquisition costs and did not recognize any impairment losses in relation to the deferred costs.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

during that period that were not part of an overall strategic shift.

Costs related to the restructuring plan are classified as Restructuring charges on the consolidated statements of operations.

The actions under our restructuring plan were completed as of September 30, 2017 and substantially all of the cash payments for actions under that plan were disbursed as of December 31, 2018.

During the third quarter of 2017, we reached a decision to cease most of our food delivery operations and entered into a long-term commercial agreement with a subsidiary of Grubhub that will allow us to provide customers with the ability to order food delivery through our websites and mobile applications in the United States from Grubhub's network of restaurant merchants.

See Note 6 , Goodwill and Other Intangible Assets , for additional information.

For the year ended December 31, 2017, our restructuring costs associated with ceasing those food delivery operations were $ 2.6 million , primarily related to employee severance.

Additionally, we entered into an agreement to sell customer lists and other intangible assets in certain food delivery markets to Grubhub.

We incurred cumulative costs for employee severance and benefits and other exit costs of $ 80.1 million under the plan since its inception in September 2015.

In addition to those costs, we incurred cumulative long-lived asset impairment charges of $ 7.5 million resulting from our restructuring activities.

There were no asset impairments as a result of restructuring activities during the years ended December 31, 2019, 2018 and 2017.

The amounts presented in Restructuring charges for the years ended December 31, 2019 and 2018 reflect changes in estimates related to prior actions.

The following tables summarize costs incurred by segment related to the restructuring plan for the years ended December 31, 2019 , 2018 and 2017 (in thousands):

Year Ended December 31, 2019

Employee Severance and Benefit Costs

Other Exit Costs

Total Restructuring Charges

North America

International

Year Ended December 31, 2018

Employee Severance and Benefit Costs

Other Exit Costs

Total Restructuring Charges

North America

International

Allowance for Expected Credit Losses on Accounts Receivable

The following table summarizes the activity in the allowance for expected credit losses on accounts receivables for the year ended December 31, 2020 (in thousands):

Allowance for Expected Credit Losses

Balance as of January 1, 2020 $ 3,693

Change in provision 9,631

Write-offs ( 3,315 )

Foreign currency translation ( 253 )

Balance as of December 31, 2020 $ 9,756

RESTRUCTURING AND RELATED CHARGES

In April 2020, the Board approved a multi-phase restructuring plan of up to $ 105.0 million of total pretax charges related to our previously announced strategic shift and as part of the cost cutting measures implemented in response to the impact of COVID-19 on our business.

We expect to incur total pretax charges of $ 75.0 million to $ 105.0 million in connection with the multi-phase restructuring actions through the end of 2021.

The first phase of the 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.

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.

The majority of our restructuring charges are expected to be paid in cash and primarily relate to employee severance and benefits expenses, facilities-related costs and professional advisory fees.

We will continue to evaluate our cost structure, including additional workforce reductions, as part of our restructuring plan.

Costs incurred related to the restructuring plan are classified as Restructuring and related charges on the consolidated statements of operations.

The following table summarizes costs incurred by segment related to the restructuring plan for the year ended December 31, 2020 (in thousands):

Year Ended December 31, 2020

Employee Severance and Benefit Costs (1)

Other Exit Costs

Legal and Advisory Costs Property, Equipment and Software Impairments (2)

Right-of-Use Asset Impairments and Lease-related Charges (3)

Total Restructuring Charges

1 unchanged sentence

International 20,679 829 291 5,310 27,109

The employee severance and benefit costs for the year ended December 31, 2017 related to the termination of approximately 750 employees.

Consolidated $ 38,001 $ 2,137 $ 5,613 $ 19,085 $ 64,836

(1) The employee severance and benefits costs for the year ended December 31, 2020 are related to the termination and planned termination of approximately 1,200 employees.

Additional severance and benefits costs may be incurred in future periods.

Substantially all of the remaining cash payments for the costs accrued as of December 31, 2020 are expected to be disbursed by the end of 2021.

(2) Includes long-lived asset impairments of $ 5.6 million for the year ended December 31, 2020.

(3) Includes long-lived asset impairments of $ 16.0 million for the year ended December 31, 2020.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As a part of our restructuring plan, we vacated several of our leased facilities, and many of those facilities are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.

Rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income and other variable lease costs related to the leased facilities vacated as part of our restructuring plan are presented within Restructuring and related charges in the consolidated statements of operations.

The current and non-current liabilities associated with these leases continue to be presented within Other current liabilities and Operating lease obligations in the consolidated balance sheets.

Due to actions taken under our restructuring plan, we recognized $ 18.1 million and $ 3.5 million of long-lived asset impairment in our North America and International segments during the year ended December 31, 2020.

The following table summarizes restructuring liability activity for the years ended December 31, 2020 and 2019 (in thousands):

Employee Severance and Benefit Costs

Other Exit Costs

Employee Severance and Benefit Costs Other Exit Costs Total

Balance as of December 31, 2018 $ 1,119 $ — $ 1,119

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Balance as of December 31, 2019 (1)

$ 699 $ — $ 699

Charges payable in cash (2)

36,266 2,137 38,403

Cash payments ( 25,328 ) ( 1,289 ) ( 26,617 )

1 unchanged sentence

Balance as of December 31, 2020 $ 13,297 $ 834 $ 14,131

(1) Amounts included in the year ended December 31, 2019 are related to prior restructuring plans and the liabilities under those plans have been substantially settled.

(2) Excludes stock-based compensation of $ 1.7 million related to accelerated vesting of stock-based compensation awards for certain employees terminated as a result of our restructuring activities during the year ended December 31, 2020.

The components of pretax income (loss) 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

United States $ ( 55,699 ) $ 6,758 $ 23,349

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Year Ended December 31,

2020 2019 2018

Continuing Operations $ ( 7,504 ) $ 761 $ ( 957 )

Discontinued Operations — — —

Total $ ( 7,504 ) $ 761 $ ( 957 )

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The provision (benefit) for income taxes from continuing operations for the years ended December 31, 2020, 2019 and 2018 consisted of the following components (in thousands):

Year Ended December 31,

2020 2019 2018

Current taxes:

federal $ ( 180 ) $ ( 5,901 ) $ 768

State 1,719 929 57

International ( 1,942 ) 7,218 3,218

1 unchanged sentence

Deferred taxes:

federal 32 32 ( 319 )

State 114 ( 9 ) —

International ( 7,247 ) ( 1,508 ) ( 4,681 )

1 unchanged sentence

Provision (benefit) for income taxes $ ( 7,504 ) $ 761 $ ( 957 )

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The items accounting for differences between the income tax provision (benefit) from continuing operations computed at the U.S.

1 unchanged sentence

Year Ended December 31,

2020 2019 2018 (2)

federal income tax provision (benefit) at statutory rate $ ( 61,805 ) $ ( 2,842 ) $ 216

Foreign income and losses taxed at different rates (1)

8,608 5,529 2,113

State income taxes, net of federal benefits, and state tax credits 6,487 5,297 720

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Non-deductible stock-based compensation expense 3,803 6,355 3,239

Tax shortfalls on stock-based compensation awards

Federal research and development credits

Tax (windfalls)/shortfalls on stock-based compensation awards 3,876 2,042 ( 335 )

Federal research and development credits, net of adjustments 6,043 3,447 ( 8,331 )

Forgiveness of intercompany liabilities ( 2,863 ) 67 ( 1,340 )

1 unchanged sentence

Net operating loss expiration 19,962 12,537 —

Goodwill impairment 23,202 — —

Non-deductible or non-taxable items 4,557 ( 5,736 ) 20,134

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This results in an adverse impact to the provision (benefit) for income taxes in this rate reconciliation for the years ended December 31, 2020, 2019 and 2018 prior to the impact of valuation allowances, due to the net pretax losses from continuing operations in certain foreign jurisdictions with lower tax rates.

The effect of income tax rate changes on deferred items for the year ended December 31, 2017 is primarily related to the U.S.

tax reform legislation that was signed into law on December 22, 2017, which included a reduction of the U.S.

Federal income tax rate to 21 percent.

That rate reduction did not impact our provision for income taxes for the year ended December 31, 2017 due to the valuation allowance against our U.S.

net deferred tax assets.

(2) During the year ended December 31, 2019, we updated our net operating losses to remove deferred tax assets that could never be utilized due to IRC Section 382 limitations.

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Intangible assets, net 22,974 21,002

Investments 24,885 23,012

Unrealized foreign currency exchange losses 1,244 3,765

Other 985 1,017

Total deferred tax assets 269,030 271,777

9 unchanged sentences

Net deferred tax asset (liability) $ 8,423 $ 927

During the year ended December 31, 2019, we updated our net operating losses to remove deferred tax assets that could never be utilized due to IRC Section 382 limitations.

The amount of Net operating loss and tax credit carryforwards and Valuation allowances for the year ended December 31, 2018 have been updated from $ 206.3 million and $ 228.0 million previously reported to reflect that change.

We have incurred significant losses in recent periods and had an accumulated deficit of $ 1,320.9 million as of December 31, 2020.

11 unchanged sentences

Year Ended December 31,

2020 2019 2018

Beginning Balance $ 64,361 $ 87,637 $ 87,359

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Total accrued interest and penalties as of December 31, 2020 and 2019 were $ 4.9 million and $ 4.9 million, and are included within Other non-current liabilities in our consolidated balance sheets.

We are currently under IRS audit for the 2015, 2016 and 2017 tax years.

Additionally, we are currently under audit by several foreign jurisdictions.

We are currently under audit by several foreign jurisdictions.

It is likely that the examination phase of some of those audits will conclude in the next 12 months.

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Groupon uses a cost-sharing arrangement under which controlled members agree to share the costs and risks of developing intangible properties in accordance with their reasonably anticipated share of benefits from the intangibles.

On July 24, 2018, the Ninth Circuit Court of Appeals issued an opinion in Altera Corp.

In 2019, the Ninth Circuit Court of Appeals entered a decision in Altera Corp.

Commissioner requiring related parties in an intercompany cost-sharing arrangement to share expenses related to stock-based compensation.

This opinion reversed an earlier decision of the United States Tax Court.

On August 7, 2018, the Ninth Circuit Court of Appeals withdrew its July 24, 2018 opinion.

On June 7, 2019, the United States Court of Appeals for the Ninth Circuit reversed the Tax Court decision and ruled that stock-based compensation must be included in the shared pool of expenses.

The ruling, which was outside the Circuit Court of Appeals for Groupon, did not have a material impact on our provision for income taxes for the year ended December 31, 2019.

Altera then petitioned the United States Supreme Court to review the Ninth Circuit's decision.

In June 2020, the Supreme Court denied this petition, and accordingly, the Ninth Circuit's Altera decision stands.

The Altera decision did not have a material impact on our provision for income taxes for the years ended December 31, 2020 and 2019 .

GROUPON, INC.

1 unchanged sentence

VARIABLE INTEREST ENTITY

Variable interest entities ("VIEs") are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., the ability to make significant decisions through voting rights and the right to receive the expected residual returns of the entity or the obligation to absorb the expected losses of the entity).

A variable interest holder that has both (a) the power to direct the activities of the VIE that most significantly impact its economic performance and (b) either an obligation to absorb losses or a right to receive benefits that could potentially be significant to the VIE is referred to as the primary beneficiary and must consolidate the VIE.

We have an arrangement with a strategic partner to offer deals related to live events, and a limited liability company ("LLC") has been established to administer that arrangement.

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Fair value option investments and available-for-sale securities.

To determine the fair value of our fair value option investments each period, we first estimate the fair value of each entity in its entirety.

We primarily use the discounted cash flow method, which is an income approach, to estimate the fair value of the entities.

We use the discounted cash flow method, which is an income approach, to estimate the fair value of the investees.

The key inputs to determining fair values under that approach are cash flow forecasts and discount rates.

We also use a market approach valuation technique, which is based on market multiples of guideline companies, to determine the fair value of each entity.

The discounted cash flow and market multiple valuations are then

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

evaluated and weighted to determine the amount that is most representative of the fair value of each entity.

Once we determine the fair value of each entity, we then determine the fair value of our specific investments in those entities.

The entities have complex capital structures, so we apply an option-pricing model that considers the liquidation preferences of each entity's respective classes of ownership interests to determine the fair value of our investment in each entity.

We also have investments in redeemable preferred shares and had investments in convertible debt securities issued by nonpublic entities.

We also have investments in redeemable preferred shares.

We measure the fair value of those available-for-sale securities using the discounted cash flow method.

We have classified our fair value option investments and our investments in available-for-sale securities as Level 3 due to the lack of observable market data over fair value inputs such as cash flow projections and discount rates.

Increases in projected cash flows and decreases in discount rates contribute to increases in the estimated fair values of the fair value option investments and available-for-sale securities, whereas decreases in projected cash flows and increases in discount rates contribute to decreases in their fair values.

Increases in projected cash flows and decreases in discount rates contribute to increases in the estimated fair values of the fair value option investments and available-for-sale securities, whereas

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

decreases in projected cash flows and increases in discount rates contribute to decreases in their fair values.

Our fair value option investments were $ 0.0 million and $ 1.4 million as of December 31, 2020 and 2019.

Contingent consideration.

1 unchanged sentence

See Note 5, Business Combinations , for further discussion of that acquisition.

Additionally, we had contingent obligations in prior periods to transfer cash to the former owners of a previous business acquisition if specified financial results were met (i.e.

Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred in the related business combination and subsequent changes in fair value recorded in earnings within Selling, general and administrative expense on the consolidated statements of operations.

We use an income approach to value contingent consideration obligations based on the present value of probability-weighted future cash flows.

We classify the contingent consideration liabilities as Level 3 due to the lack of relevant observable market data over fair value inputs such as probability-weighting of payment outcomes.

The following tables summarize assets that are measured at fair value on a recurring basis as of December 31, 2019 and 2018 (in thousands):

Fair Value Measurement at Reporting Date Using

December 31, 2019

Quoted Prices in Active Markets for

Identical Assets

Significant Other

Observable Inputs

Fair value option investments

Available-for-sale securities - redeemable preferred shares

Contingent consideration

Fair Value Measurement at Reporting Date Using

December 31, 2018

Quoted Prices in Active Markets for

Identical Assets

Significant Other

Observable Inputs

Fair value option investments

Available-for-sale securities - redeemable preferred shares

Contingent consideration

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31,

2020 2019 2018

Fair value option investments:

3 unchanged sentences

Unrealized (losses) gains still held (1)

$ ( 1,405 ) $ ( 72,497 ) $ ( 9,064 )

Available-for-sale securities

1 unchanged sentence

Beginning Balance $ — $ — $ 11,354

Purchases and acquisition of convertible debt securities

Proceeds from sales and maturities of convertible debt securities — — ( 8,594 )

10 unchanged sentences

Unrealized gains (losses) still held (1)

$ — $ ( 10,340 ) $ ( 5,091 )

Contingent Consideration:

2 unchanged sentences

Settlements of contingent consideration liabilities ( 908 ) ( 312 ) —

Reclass to non-fair value liabilities when no longer contingent

Total losses (gains) included in earnings 6 39 56

2 unchanged sentences

Unrealized losses (gains) still held (1)

$ 6 $ 39 $ 56

(1) Represents the unrealized gains or losses recorded in earnings and/or other comprehensive income (loss) during the period for assets and liabilities classified as Level 3 that are still held (or outstanding) at the end of the period.

Represents a gain at maturity of a previously impaired convertible debt security, accretion of interest income and changes in the fair value of an embedded derivative.

(2) Represents a gain at maturity of a previously impaired convertible debt security, accretion of interest income and changes in the fair value of the embedded derivative.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are written down to fair value as a result of an impairment or increased due to an observable price change in an orderly transaction.

We recognized $ 109.5 million in non-cash impairment charges related to goodwill and $ 44.0 million in non-

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

cash impairment charges related to long-lived assets during the year ended December 31, 2020, of which $ 21.6 million is included in Restructuring and related charges on our consolidated statements of operations.

See Note 6, Property, Equipment and Software, Net, Note 7, Goodwill and Other Intangible Assets, Note 11, Leases and Note 16, Restructuring and Related Charges , for additional information.

We recognized a $ 6.7 million impairment related to an other equity method investment during the year ended December 31, 2020.

See Note 8, Investments , for additional information.

For the year ended December 31, 2019, we adjusted the carrying value of an other equity investment for observable price changes in an orderly transaction, which resulted in an unrealized gain of $ 51.4 million.

See Note 8, Investments , for additional information.

For the year ended December 31, 2018, we recorded a $ 4.6 million impairment of an other equity investment.

1 unchanged sentence

We have classified the fair value measurement of that other equity investment as Level 3 because it involves significant unobservable inputs.

Refer to Note 7 , Investments , for additional information.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We did not record any significant nonrecurring fair value measurements after initial recognition for the year ended December 31, 2017.

See Note 8, Investments , for additional information.

Estimated Fair Value of Financial Assets and Liabilities Not Measured at Fair Value

8 unchanged sentences

Year Ended December 31,

2020 2019 2018

Basic and diluted net income (loss) per share:

4 unchanged sentences

Net income (loss) attributable to common stockholders $ ( 287,931 ) $ ( 22,377 ) $ ( 11,079 )

Shares used in computation of basic net income (loss) per share

Weighted-average effect of diluted securities:

Stock Options

Restricted Stock

Restricted Stock Units

Employee Stock Purchase Plan

Performance Share Units and Performance Bonus Awards

Shares used in computation of diluted net income (loss) per share

Basic net income (loss) per share:

Continuing operations

Discontinued operations

Basic net income (loss) per share

Diluted net income (loss) per share:

Weighted-average common shares outstanding 28,604,115 28,370,417 28,325,555

Basic and diluted net income (loss) per share:

Continuing operations $ ( 10.08 ) $ ( 0.88 ) $ ( 0.39 )

Discontinued operations 0.01 0.09 —

Diluted net income (loss) per share

Basic and diluted net income (loss) per share $ ( 10.07 ) $ ( 0.79 ) $ ( 0.39 )

GROUPON, INC.

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

Restricted stock units 1,887,322 1,652,002 1,527,601

1 unchanged sentence

Convertible senior notes 2,314,815 2,314,815 2,314,815

Warrants 2,314,815 2,314,815 2,314,815

Total 6,716,581 6,407,194 6,259,285

We had outstanding Market-based Performance Share Units as of December 31, 2020 that were eligible to vest into shares of common stock subject to the achievement of specified performance or market conditions.

3 unchanged sentences

The segment information reported in the tables below reflects the operating results that are regularly reviewed by our chief operating decision maker to assess performance and make resource allocation decisions.

During the third quarter 2020, we changed our measure of segment profitability from operating income (loss) to contribution profit, defined as gross profit less marketing expense, which is consistent with how management reviews the operating results of the segments.

Contribution profit measures the amount of marketing investment needed to generate gross profit.

Other operating expenses are excluded from contribution profit as management does not review those expenses by segment.

Our operations are organized into two segments:

North America and International.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes revenue by reportable segment and category for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31,

2020 2019 2018

North America

Service revenue:

Local $ 432,183 $ 721,038 $ 752,863

Goods 35,276 16,236 18,283

Travel 17,686 57,939 71,856

Total service revenue 485,145 795,213 843,002

1 unchanged sentence

Total North America revenue (1)

$ 818,624 $ 1,358,907 $ 1,639,395

International

Service revenue:

Local $ 138,274 $ 287,611 $ 306,700

Goods 11,757 9,441 14,602

Travel 8,477 34,092 41,183

Total service revenue 158,508 331,144 362,485

1 unchanged sentence

Total International revenue (1)

$ 598,244 $ 860,008 $ 997,351

(1) North America includes revenue from the United States of $ 808.3 million, $ 1,333.9 million and $ 1,600.2 million for the years ended December 31, 2020, 2019 and 2018.

2 unchanged sentences

Revenue is attributed to individual countries based on the location of the customer.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes gross profit by reportable segment and category for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31,

2020 2019 2018

North America

Service gross profit:

Local $ 379,040 $ 643,499 $ 671,352

Goods 28,852 13,165 15,302

Travel 12,907 45,739 57,945

Total service gross profit 420,799 702,403 744,599

3 unchanged sentences

Service gross profit:

Local $ 125,912 $ 269,666 $ 289,427

Goods 10,496 8,509 13,252

Travel 7,150 31,317 38,132

Total service gross profit 143,558 309,492 340,811

1 unchanged sentence

Total International gross profit $ 201,663 $ 378,384 $ 429,917

The following table summarizes operating income by reportable segment for the years ended December 31, 2019 , 2018 and 2017 (in thousands):

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes contribution profit by reportable segment for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31,

Operating income (loss) (1) (2) (3) (4) :

2020 2019 2018

North America

Gross profit $ 475,631 $ 807,745 $ 890,684

Marketing 96,039 214,069 273,787

Contribution profit 379,592 593,676 616,897

International

Total operating income (loss)

Includes stock-based compensation of $ 72.8 million , $ 59.7 million and $ 76.1 million for North America and $ 8.8 million , $ 5.0 million and $ 5.7 million for International for the years ended December 31, 2019 , 2018 and 2017 , respectively .

Includes acquisition-related (benefit) expense, net of $ 0.7 million for International for the year ended December 31, 2018.

Includes restructuring charges for North America and International.

See Note 15 , Restructuring , for restructuring charges by segment.

Includes a $ 34.6 million charge related to the IBM patent litigation matter for North America for the year ended December 31, 2018.

Gross profit 201,663 378,384 429,917

Marketing 58,495 125,286 121,950

Contribution profit 143,168 253,098 307,967

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

Marketing 154,534 339,355 395,737

Contribution profit 522,760 846,774 924,864

Selling, general and administrative 603,185 806,945 870,961

Goodwill impairment 109,486 — —

Long-lived asset impairment 22,351 — —

Restructuring and related charges 64,836 31 ( 136 )

Income (loss) from operations $ ( 277,098 ) $ 39,798 $ 54,039

The following table summarizes total assets by reportable segment as of December 31, 2020 and 2019 (in thousands):

1 unchanged sentence

North America (1)

$ 971,110 $ 1,045,500

International (1)

440,397 541,243

Consolidated total assets $ 1,411,507 $ 1,586,743

(1) North America contains assets from the United States of $ 948.1 million and $ 1,020.0 million as of December 31, 2020 and 2019.

International contains assets from Ireland of $ 204.6 million as of December 31, 2018 and from Switzerland of $ 175.2 million as of December 31, 2019 .

Assets from Ireland were less than 10% of consolidated total assets as of December 31, 2019 .

International contains assets from Switzerland of $ 151.7 million and $ 175.2 million as of December 31, 2020 and 2019.

There were no other individual countries that represented more than 10% of consolidated total assets as of December 31, 2020 and 2019.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes tangible property and equipment, net of accumulated depreciation and amortization, by reportable segment as of December 31, 2020 and 2019 (in thousands):

North America (1)

$ 19,427 $ 35,798

International (1)

Consolidated total

$ 27,229 $ 53,517

(1) Substantially all tangible property and equipment within North America is located in the United States.

There were no other individual countries located outside of the United States that represented more than 10% of consolidated tangible property and equipment, net as of December 31, 2020 and 2019.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes depreciation and amortization of property, equipment and software and intangible assets by reportable segment for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31,

2020 2019 2018

North America $ 78,805 $ 89,083 $ 101,419

1 unchanged sentence

Consolidated total

$ 87,522 $ 105,765 $ 115,828

The following table summarizes expenditures for additions to tangible long-lived assets by reportable segment for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Year Ended December 31,

2020 2019 2018

North America $ 2,000 $ 6,791 $ 6,194

1 unchanged sentence

Consolidated total

RELATED PARTY TRANSACTION

On December 28, 2016, we entered into a sublease for portions of our office space at 600 West Chicago to Uptake, Inc.

("Uptake"), a Lightbank LLC ("Lightbank") portfolio company.

Eric Lefkofsky, our co-founder and Chairman of the Board, is a co-founder and owns a significant equity interest in Lightbank.

The sublease was a market rate transaction on terms that we believe are no less favorable than would have been reached with an unrelated third party.

The sublease extends through January 31, 2026 and sublease rentals over the entire term total approximately $ 18.2 million .

Pursuant to our related party transaction policy, our Audit Committee approved the sublease.

We recognized income from the sublease of $ 2.1 million , $ 2.1 million and $ 1.9 million for the years ended December 31, 2019 , 2018 and 2017 .

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTERLY RESULTS (UNAUDITED)

The following table represents data from our unaudited consolidated statements of operations for the most recent eight quarters.

This quarterly information has been prepared on the same basis as the consolidated financial statements and includes all normal recurring adjustments necessary to fairly state the information for the periods presented.

The results of operations of any quarter are not necessarily indicative of the results that may be expected for any future period (in thousands, except share and per share amounts).

Quarter Ended

Consolidated Statements of Operations Data:

Cost of revenue

Income (loss) from operations

Income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss) attributable to Groupon, Inc.

Basic net income (loss) per share (2) :

Continuing operations

Discontinued operations

Basic net income (loss) per share

Diluted net income (loss) per share (2) :

Continuing operations

Discontinued operations

Diluted net income (loss) per share

Income (loss) from continuing operations includes a $ 40.4 million benefit and $ 75.0 million charge for the three months ended September 30, 2018 and June 30, 2018 related to our patent litigation with IBM.

The sum of per share amounts for quarterly periods may not equal year-to-date amounts due to rounding.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SUBSEQUENT EVENTS

In January 2020, we sold 50 % of our shares in an other equity investment for total cash consideration of $ 34.0 million , which approximated cost adjusted for observable price changes as of December 31, 2019.

Refer to Note 7 , Investments , for additional information.

In February 2020, we announced that we plan to exit our Goods category.

After we exit the Goods category, we will no longer generate product revenue or service revenue from goods offerings and no longer incur the related costs of revenue.

We are currently evaluating the accounting impacts of this announcement.

$ 4,707 $ 12,894 $ 16,587

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data