What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-02-25 · 519 added, 629 removed, 1094 unchanged (51% 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, 2021, 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 28, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

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 communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Variable Consideration Revenue Recognition—Refer to Notes 2 and 13 to the financial statements

Critical Audit Matter Description

In accordance with the measurement principles of the revenue recognition accounting standard, the Company estimates variable consideration and includes such estimates in its determination of the transaction price that is recognized as revenue.

The Company’s estimate of variable consideration each period is associated with gross billings for vouchers that are ultimately not redeemed by customers and for which the Company’s payment terms to merchants are upon redemption.

For vouchers with redemption payment terms, the merchant is not paid its share of the sale price for a voucher sold unless and until the customer redeems the related voucher.

If the voucher is never redeemed by the customer, the Company retains the full amount paid for the voucher and is not required to remit to the merchant its portion of the voucher’s sales proceeds.

Evaluating management’s model and assumptions used to estimate variable consideration revenue involved especially subjective judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to evaluating the Company’s model and assumptions used to estimate the variable consideration revenue amount included the following, among others:

• We tested the effectiveness of controls over the estimation of the variable consideration revenue.

• We evaluated the Company’s model used to measure the variable consideration revenue amount by considering if it conforms with the objectives and measurement principles of the revenue recognition standard related to variable consideration.

• We evaluated whether the Company used the proper data in the model.

We also tested the completeness and accuracy of the data used in the model.

• We evaluated the assumptions used in the model, specifically the estimated redemption rates for cohorts of vouchers, by comparing the assumed redemption rates used in the model to historical redemption rates for similar vouchers.

Valuation Allowance on Deferred Tax Assets—Refer to Notes 2 and Note 15 to the financial statements

Critical Audit Matter Description

The Company recognizes deferred income tax assets and liabilities for the estimated future tax effects attributable to temporary differences and carryforwards.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized in the future.

Future realization of deferred tax assets depends on the existence of sufficient taxable income within the carryback or carryforward period of the appropriate character under the relevant tax law.

Sources of taxable income include future reversals of deferred tax assets and liabilities, future taxable income (exclusive of the reversals of deferred tax assets and liabilities), taxable income in prior carryback year(s) if permitted under the tax law, and tax planning strategies.

During 2021, the Company reversed $57.7 million of its valuation allowance related to domestic deferred tax assets because they concluded that it was more-likely-than-not that the domestic deferred tax assets were realizable based on current circumstances.

The Company’s valuation allowance for all deferred tax assets was $145.1 million as of December 31, 2021.

The Company’s determination of the valuation allowance involves estimates.

Management’s primary estimate in determining whether a valuation allowance should be established is the projection of future sources of taxable income.

Auditing management’s estimate of future sources of taxable income, which affects the recorded valuation allowances, involved especially subjective judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to evaluating the basis for management’s conclusions regarding the realizability of deferred tax assets included the following, among others:

• We tested the effectiveness of controls over management’s deferred tax asset realizability assessment.

• With the assistance of our income tax specialists, we considered relevant tax laws and regulations in evaluating the appropriateness of management’s estimates of future sources of taxable income.

• We evaluated the reasonableness of management’s estimates of future sources of taxable income by comparing the estimates to historical sources of taxable income or losses and to forecasted information used in other areas of management’s accounting reporting models.

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

• With the assistance of our income tax specialists, we evaluated whether the estimated future sources of taxable income were of the appropriate character to utilize the deferred tax assets under tax law.

• We evaluated management’s assessment that it is more-likely-than-not that sufficient taxable income will be generated in the future to utilize the net domestic deferred tax assets.

We considered the appropriateness of the timing of the change in assessment of realizability of the domestic deferred tax assets, giving consideration to current and historical facts and circumstances.

Income Taxes—Foreign Tax Position—Refer to Notes 2 and 15 to the financial statements

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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).

The Company determines the fair value of its reporting units primarily 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 $216.4 million as of December 31, 2021.

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.

The Company did not record any goodwill impairment charges for the year ended December 31, 2021.

Auditing the estimates and assumptions that impacted the valuation of the reporting units 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

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• 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.

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.

2 unchanged sentences

◦ 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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Investments 119,541 37,671

Deferred income taxes 62,945 11,593

Other non-current assets 25,102 22,734

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

Total assets $ 1,157,881 $ 1,411,507

Liabilities and equity

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Total liabilities 947,585 1,303,833

1,303,833 1,191,697

Commitments and contingencies (see Note 10)

4 unchanged sentences

Additional paid-in capital 2,294,215 2,348,114

2,348,114 2,310,393

Treasury stock, at cost, 10,294,117 shares at December 31, 2021 and December 31, 2020

4 unchanged sentences

stockholders' equity 209,872 107,675

107,675 393,936

Noncontrolling interests 424 ( 1 )

107,674 395,046

Total equity 210,296 107,674

Total liabilities and equity $ 1,157,881 $ 1,411,507

$ 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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$ 118,668 $ ( 287,931 ) $ ( 22,377 )

Basic and diluted net income (loss) per share:

Basic net income (loss) per share:

Continuing operations $ 4.04 $ ( 10.08 ) $ ( 0.88 )

Discontinued operations — 0.01 0.09

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

Basic net income (loss) per share $ 4.04 $ ( 10.07 ) $ ( 0.79 )

Diluted net income (loss) per share:

Continuing operations $ 3.68 $ ( 10.08 ) $ ( 0.88 )

Discontinued operations — 0.01 0.09

Diluted net income (loss) per share $ 3.68 $ ( 10.07 ) $ ( 0.79 )

Weighted average number of shares outstanding:

1 unchanged sentence

Diluted 33,513,440 28,604,115 28,370,417

(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.

7 unchanged sentences

Net change in unrealized gain (loss) on foreign currency translation adjustments ( 40,195 ) ( 35,972 ) 4,858

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 )

Reclassification of cumulative foreign currency translation adjustments (See Note 14)

Net change in unrealized gain (loss) on available-for-sale securities (net of tax effect of $ 0 for all periods presented)

Other comprehensive income (loss) from continuing operations ( 7,922 ) ( 35,972 ) 4,479

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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.

Common Stock Additional Paid-In Capital Treasury Stock Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Groupon, Inc.

Stockholders' Equity Non-controlling Interests Total Equity

1 unchanged sentence

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

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

2 unchanged sentences

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

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 ( 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

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 3,743 — 40 — — — — 40 — 40

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

2 unchanged sentences

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

Repurchases of common stock — — — ( 701,361 ) ( 45,175 ) — — ( 45,175 ) — ( 45,175 )

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

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

Cumulative effect of change in accounting principle due to adoption of ASU 2020-06, net of tax — — ( 64,319 ) — — 45,350 — ( 18,969 ) — ( 18,969 )

Comprehensive income (loss) — — — — — 118,668 ( 7,922 ) 110,746 1,680 112,426

2 unchanged sentences

Tax withholdings related to net share settlements of stock-based compensation awards ( 504,735 ) — ( 19,834 ) — — — — ( 19,834 ) — ( 19,834 )

Purchase of capped call transactions, net of tax — — ( 20,502 ) — — — — ( 20,502 ) — ( 20,502 )

Settlement of convertible note hedges, net of tax — — 14,511 — — — — 14,511 — 14,511

Settlement of warrants — — ( 1,752 ) — — — — ( 1,752 ) — ( 1,752 )

Stock-based compensation on equity-classified awards — — 36,869 — — — — 36,869 — 36,869

1 unchanged sentence

Balance at December 31, 2021 40,007,255 $ 4 $ 2,294,215 ( 10,294,117 ) $ ( 922,666 ) $ ( 1,156,868 ) $ ( 4,813 ) $ 209,872 $ 424 $ 210,296

(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.

10 unchanged sentences

120,348 ( 286,562 ) ( 14,292 )

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

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

Depreciation and amortization of property, equipment and software

6 unchanged sentences

33,169 39,010 81,615

Impairments of investments

6,684 9,961 10,156

Upward adjustment for observable price change of investment

— ( 51,397 ) —

Changes in fair value of investments ( 95,623 ) 8,089 31,061

Deferred income taxes

( 33,985 ) ( 7,101 ) ( 1,485 )

(Gain) loss from changes in fair value of investments

1,405 72,497 9,064

Amortization of debt discount on convertible senior notes

1,601 14,621 13,200

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

Foreign currency translation adjustments reclassified into earnings ( 32,273 ) — —

Change in assets and liabilities:

Accounts receivable

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( 49,630 ) ( 48,711 ) ( 67,328 )

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 )

Proceeds from sale or divestment of investment 6,950 31,605 3,475

Acquisitions of intangible assets and other investing activities

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Financing activities

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

Issuance costs for revolving credit agreement

( 1,686 ) ( 2,384 ) —

Proceeds from issuance of 2026 convertible notes 230,000 — —

Proceeds from (payments of) borrowings under revolving credit agreement ( 100,000 ) 200,000 —

Issuance costs for 2026 convertible notes and revolving credit agreement ( 7,747 ) ( 1,686 ) ( 2,384 )

Purchase of capped call transactions ( 27,416 ) — —

Payments for the repurchase of Atairos convertible notes ( 254,000 ) — —

Proceeds from the settlement of convertible note hedges 2,315 — —

Payments for the settlement of warrants ( 1,345 ) — —

Payments for repurchases of common stock

2 unchanged sentences

( 19,834 ) ( 10,607 ) ( 18,105 )

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

( 5,302 ) ( 8,930 ) ( 19,687 )

Payments of contingent consideration related to acquisitions

( 908 ) — ( 1,815 )

Payment of financing obligation related to acquisition

— — ( 8,391 )

Other financing activities

( 521 ) ( 1,979 ) ( 6,812 )

Net cash provided by (used in) financing activities

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Income tax payments (refunds) for continuing operations $ 11,145 $ 3,262 $ 11,898

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

Cash paid for interest 13,866 12,749 9,145

12,749 9,145 9,556

Non-cash investing and financing activities

Continuing operations:

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

Supplemental cash flow information on our leasing obligations

17 unchanged sentences

Groupon, Inc.

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.

and its 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 those marketplaces through our mobile applications and our websites.

Our operations are organized into two segments:

North America and International.

See Note 21, Segment Information

See Note 19, Segment Information, for more 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.

For the years ended December 31, 2021 and 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

8 unchanged sentences

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.

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.

This ASU expands the scope to make the guidance for share-based payment awards to nonemployees consistent with the guidance for share-based payment awards to employees.

The adoption of ASU 2018-07 did not have a material impact on the consolidated financial statements.

We adopted the guidance in ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, on January 1, 2019.

This ASU requires entities in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40, Internal-Use Software , to determine which costs to implement the service contract would be capitalized as an asset related to the service contract and which costs would be expensed.

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 $ 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We adopted the guidance in ASC Topic 606, Revenue from Contracts with Customers , on January 1, 2018.

Topic 606 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

We adopted Topic 606 using the modified retrospective method.

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.

For additional information on the impact of adoption of Topic 606 on our accounting policies, refer to our discussion under Revenue Recognition below .

We recorded a net reduction to our opening accumulated deficit of $ 88.9 million, which is net of a $ 6.7 million income tax effect, as of January 1, 2018 due to the cumulative impact of adopting Topic 606.

The following table summarizes balance sheet accounts impacted by the cumulative effect of adopting Topic 606 (in thousands):

Increase (decrease) to beginning accumulated deficit

Prepaid expenses and other current assets $ ( 4,007 )

Other non-current assets ( 10,223 )

Accrued merchant and supplier payables ( 64,970 )

Accrued expenses and other current liabilities ( 13,188 )

Other non-current liabilities 3,443

Effect on beginning accumulated deficit $ ( 88,945 )

We adopted the guidance in ASU 2016-01, Financial Instruments (Topic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities , as amended, on January 1, 2018.

This ASU generally requires equity investments to be measured at fair value with changes in fair value recognized through net income and eliminates the cost method for equity securities.

However, for equity investments without readily determinable fair values, the ASU permits entities to elect to measure the investments at cost adjusted for observable price changes and impairments, with changes in the measurement recognized through net income.

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

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 consolidated statements of cash flows.

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

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.

This ASU is meant to clarify the scope of ASC Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets , and to add guidance for partial sales of nonfinancial assets.

The adoption of ASU 2017-05 did not have a material impact on the consolidated financial statements.

We adopted the guidance in ASU 2017-07, Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , on January 1, 2018.

This ASU requires employers to include only the service cost component of net periodic pension cost in operating expenses, together with other employee compensation costs.

The other components of net periodic pension cost, including interest cost, expected return on plan assets, amortization of prior service cost and settlement and curtailment effects, are to be included in non-operating expenses.

We adopted the guidance in Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, on January 1, 2021 .

This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

The adoption of ASU 2019-12 did not have a material impact on the consolidated financial statements.

We adopted the guidance in ASU 2017-09, Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting , on January 1, 2018.

This ASU clarifies the changes to terms or conditions of a share-based payment award that require an entity to apply modification accounting.

We adopted the guidance in ASU 2020-03, Codification Improvements to Financial Instruments, on January 1, 2021.

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

The adoption of ASU 2020-03 did not have a material impact on the consolidated financial statements.

We early adopted the guidance in 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, on January 1, 2021.

The ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature.

Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of income (loss) per share for convertible instruments and contracts in an entity’s own equity.

Prior to the adoption of ASU 2020-06, we separated the convertible senior notes due 2022 (the "Atairos Notes") into their liability and equity components.

Following the adoption of ASU 2020-06, the previously bifurcated equity component of the Atairos Notes was recombined with the liability component, resulting in a single liability-classified instrument.

The carrying value of the Atairos Notes at transition was determined by recalculating the basis of the Atairos Notes as if the conversion option had not been bifurcated at issuance.

Transaction costs related to the issuance of the Atairos Notes that were allocated to the equity component were reclassified out of Additional paid-in-

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We adopted the guidance in ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, as of January 1, 2018.

This ASU permits a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Jobs Act").

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

capital and the amortization and the related debt discount associated with these costs were recalculated through the transition date.

The transaction costs were recorded as a debt discount in the consolidated balance sheets and amortized to interest expense over the remaining term of the Atairos Notes.

Together with the cash interest, this resulted in an effective interest rate of 3.76 %.

As a result of adopting ASU 2020-06 in the first quarter of 2021, we recorded a $67.0 million net reduction to additional paid-in capital, a $ 19.0 million increase to Convertible senior notes, net and a $ 48.0 million reduction to our opening accumulated deficit as of January 1, 2021.

In the fourth quarter of 2021, we recorded an additional $ 2.7 million adjustment to our opening accumulated deficit and additional paid-in capital related to tax impacts of our bond hedges.

Reclassifications

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Use of Estimates

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

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;

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

generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Estimates in our financial statements include, but are not limited to, the following:

variable consideration from unredeemed vouchers;

income taxes;

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Actual results could differ materially from those estimates.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.

Restricted cash represents amounts that we are unable to access for operational purposes.

These amounts primarily relate to withholdings from employee paychecks under our employee stock purchase plan ("ESPP").

Accounts Receivable, Net

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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.

We write down our inventory to the lower of cost or net realizable value based upon assumptions about future demand and market conditions.

If actual market conditions are less favorable than those projected, additional inventory write-downs may be required.

Once established, the original cost of the inventory less the related inventory write-down represents a new cost basis.

Property and Equipment

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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, 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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Generally, the useful lives are three to five years for computer hardware, office equipment, furniture and fixtures and the shorter of the term of the lease or the expected life of the underlying asset for leasehold improvements.

Internal-Use Software

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Amortization of internal-use software is recorded on a straight-line basis over the two-year estimated useful life of the assets.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cloud Computing Costs

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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 current and 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 Prepaid expenses and other current assets and Other 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 are recorded primarily in Selling, general and administrative expense on the consolidated statements of operations.

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

Goodwill is allocated to our reporting units at acquisition.

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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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Those investments are classified within Investments on the consolidated balance sheets.

Investments in convertible debt securities and convertible redeemable preferred shares are accounted for as available-for-sale securities, which are classified within Investments on the consolidated balance sheets.

We classify our debt securities as available-for-sale securities, which are classified within Investments on the consolidated balance sheets.

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

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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

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.

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We regularly review deferred tax assets to assess whether it is more likely than not that the deferred tax assets will be realized and, if necessary, establish a valuation allowance for portions of such assets to reduce the carrying value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For purposes of assessing whether it is more likely than not that deferred tax assets will be realized, we consider the following four sources of taxable income for each tax jurisdiction:

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Otherwise, evidence about each of the sources of taxable income is considered in arriving at a conclusion about the need for and amount of a valuation allowance.

See Note 17, Income Taxes , for further information about our valuation allowance assessments.

We are subject to taxation in the United States, various states and foreign jurisdictions.

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For tax positions meeting the more-likely-than-not criteria, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Lease and Asset Retirement Obligations

Lease Obligations

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.

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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.

We recognize a right-of-use asset and lease liability for all of our leases at the commencement of the lease.

We recognize a right-of-use asset and lease liability for all of our leases at the commencement of the lease, which is the date we have the right to control the asset.

Lease liabilities are measured based on the present value of the minimum lease payments discounted by a rate determined as of the date of commencement.

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.

For leases in which the rate implicit in the lease is not readily determinable, the discount rate is our incremental borrowing rate, which is determined based on information available at lease commencement and is equal to the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term as the lease.

Right-of-use assets are measured based on the lease liability adjusted for any initial direct costs, prepaid rent, or lease incentives.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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, 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.

Short term leases with an initial term of 12 months or less are not recorded on the balance sheet and are expensed in the period in which they are incurred.

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

We assess whether it is reasonably certain that we will exercise an option to renew or terminate a lease by considering factors that create an economic incentive or disincentive.

Certain lease agreements include variable lease costs which are primarily related to costs that are dependent on our usage of the underlying asset or lease payments that are dependent on an index when that index has changed since lease commencement.

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

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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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

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

We fully transitioned to a third-party marketplace in North America in 2020 and in International in the fourth quarter of 2021.

In a third-party marketplace model, our merchants generally assume inventory and refund risk and for those transactions we record revenue on a net basis within service revenue.

Variable Consideration for Unredeemed Vouchers

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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 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 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.

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

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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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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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Costs of Obtaining Contracts

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For product revenue transactions, cost of revenue also includes the cost of inventory, shipping and fulfillment costs and inventory markdowns.

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.

Fulfillment costs are comprised of third-party logistics provider and other costs and, prior to fully impairing our fulfillment center in 2020, rent, depreciation, personnel costs and other costs of operating our fulfillment center.

Impairment of Long-Lived Assets

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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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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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We present stock-based compensation expense within the consolidated statements of operations based on the classification of the respective employees' cash compensation.

See Note 14, Compensation Arrangements .

Foreign Currency

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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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Business Combinations

The results of businesses acquired are included in the consolidated financial statements beginning on the respective acquisition dates.

The fair value of consideration transferred in business combinations is allocated to the tangible and intangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill.

Acquired goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired.

We may pay a premium for a number of reasons, including growing our merchant base and acquiring an assembled workforce.

The goodwill from business combinations is generally not deductible for tax purposes.

Recently Issued Accounting Standards

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

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 .

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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.

We believe that the adoption of this guidance will not have a material impact 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.

COVID-19 PANDEMIC

Since March 2020, the COVID-19 pandemic has led to a significant decrease in consumer demand and active customers, a decrease in customer redemptions, and elevated refund levels due to changes in consumer behavior and protective measures taken to control the spread of COVID-19.

The COVID-19 pandemic has had an adverse impact on our financial condition, results of operations and cash flows, which included impairments of our goodwill and long-lived assets.

Recovery from the COVID-19 pandemic has been and could continue to be volatile and prolonged given the unprecedented and continuously evolving nature of the situation and the emergence and spread of new variants.

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 taken to reduce its spread.

We will continue to monitor the impact of COVID-19 on our business, particularly in our International segment where restrictions to date have been more prolonged and stricter than in North America.

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 goodwill and long-lived assets for impairment, which resulted in impairments for both.

During the third quarter 2021, we determined the prolonged recovery from the pandemic, particularly in our International segment, and the sustained decrease in our stock price required us to evaluate our goodwill and long-lived assets for impairment.

We determined there was no impairment for goodwill;

however, we recognized impairment for certain right-of-use assets and leasehold improvements related to our restructuring plan due to changes in sublease assumptions.

See Note 4, Property, Equipment and Software, Net , Note 5, Goodwill and Other Intangible Assets ,

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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.

Note 9, Leases and Note 14, Restructuring and Related Charges 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.

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See Note 14, 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 6, Investments, for more information.

Future events and changing market conditions due to the impact of COVID-19 may require us to re-evaluate the estimates used in our fair value measurements, which could result in additional impairment of goodwill and long-lived assets in future periods that may have a material effect on our operating results.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DISCONTINUED OPERATIONS

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.

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.

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.

BUSINESS COMBINATIONS

On April 30, 2018, we acquired 80 % of the outstanding shares of Cloud Savings Company, Ltd.

("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 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.

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

PROPERTY, EQUIPMENT AND SOFTWARE, NET

The following summarizes property, equipment and software, net as of December 31, 2021 and 2020 (in thousands):

Warehouse equipment $ — $ 5,144

Furniture and fixtures 5,005 9,113

Furniture and fixtures and other 5,524 5,681

Leasehold improvements 23,576 24,808

Office equipment 676 1,735

Purchased software 435 7,207

Computer hardware 121,307 143,118

Computer hardware and purchased software 118,659 121,742

Internally-developed software (1)

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(1) The net carrying amount of internally-developed software was $ 54.7 million and $ 57.9 million as of December 31, 2021 and 2020.

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-

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

adjusted discount rates;

We recognized long-lived asset impairments during the third quarter 2021 for certain leasehold improvements under our restructuring plan and the first quarter 2020 for property, equipment and software, net, as described in Note 3, COVID-19 Pandemic .

See Note 14, Restructuring and Related Charges , for more information on our restructuring impairments and details in the table below.

The asset impairments described above were written down to fair value based on the discounted cash flow method under the income approach that uses 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;

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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

The following table summarizes impairment charges for property, equipment and software that are presented within Restructuring and related charges and Long-lived asset impairment on the consolidated statements of operations for the years ended December 31, 2021 and 2020 (in thousands):

Year Ended December 31,

Long-lived asset impairment:

North America $ — $ —

International — 9,565

Long-lived asset impairment — 9,565

Restructuring and related charges:

North America 602 —

International 268 5,613

Restructuring and related charges impairment 870 5,613

Total property, equipment and software impairment $ 870 $ 15,178

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes impairment for long-lived assets by asset type for the years ended December 31, 2021 and 2020 (in thousands):

Year Ended December 31,

Long-Lived Asset Category 2021 2020

Property, equipment and software, net

Furniture and fixtures $ 413

Leasehold improvements 870 8,419

Office equipment 198

Purchased software 14

Computer hardware — 2,842

Capitalized software 304

Internally-developed software — 2,988

Other Property, equipment and software, net — 929

Total $ 870 $ 15,178

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

Impairment — ( 109,486 ) ( 109,486 )

Foreign currency translation

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

Impairment — ( 109,486 ) ( 109,486 )

— 3,776 3,776

Foreign currency translation

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Balance as of December 31, 2021 $ 178,685 $ 37,708 $ 216,393

(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.

(1) As of December 31, 2021 and 2020, the International reporting unit had a negative carrying value.

(2) Represents the reclassification between Right-of-use assets - operating leases, net and Goodwill due to an adjustment in the allocation of impairments recorded in 2020 between those two accounts.

In order to evaluate goodwill for impairment, we compare the fair values of our two reporting units, North America and International, to their carrying values.

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

During the third quarter of 2021, we evaluated our goodwill for impairment due to the circumstances described in Note 3, COVID-19 Pandemic .

The fair value of the reporting units exceeded the carrying value, therefore we concluded that goodwill was not impaired for either of our reporting units.

Additionally, we performed our annual goodwill impairment assessment as of October 1, 2021 and determined no reporting units' carrying values were in excess of their estimated fair values.

Therefore, we did no t recognize goodwill impairment for any of our reporting units during the year ended December 31, 2021.

During the first quarter 2020, we recognized goodwill impairment, as shown in the table above, due to the circumstances described in Note 3, COVID-19 Pandemic , within our International segment related to our EMEA operations.

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

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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.

Based on those assessments, 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.

There was no goodwill impairment for the year ended December 31, 2019.

GROUPON, INC.

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

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

Merchant relationships 19,976 12,554 7,422 20,208 9,236 10,972

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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 %

The following table summarizes our percentage ownership in our investments for the periods noted below:

December 31, 2021 December 31, 2020

Available-for-sale securities 1 % to 19 % 19 % to 25 %

Fair value option investments 10 % to 19 % 10 % to 19 %

Other equity investments 1 % to 19 % 1 % to 19 %

Total investments $ 37,671 $ 76,576

Available-for-Sale Securities

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.

In September 2018, we sold an available-for-sale security for total consideration of $ 8.6 million, which approximated its carrying amount and amortized cost as of the closing date.

In the fourth quarter 2021, one of our available-for-sale security investments completed a merger transaction in which we received equity in the surviving company as merger consideration.

We determined that the fair value of the transferred investment was zero.

We recorded an impairment of an available-for-sale security of $ 10.0 million for the year ended December 31, 2019 due to declines in the financial performance of the investee.

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

Our available-for-sale securities had a fair value of $ 0.0 million as of December 31, 2021 and 2020, and no activity was recorded in those years.

Fair Value Option Investments

3 unchanged sentences

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

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 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 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.

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.

In January 2017, Nearbuy issued additional Series A Preference Shares to its controlling investor for total proceeds of $ 3.0 million.

Upon closing of that transaction, the Series A Preference Shares are entitled to a $ 20.0 million liquidation preference, which must be paid prior to any distributions to other equity holders.

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.

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 $ 69.4 million loss from changes in the fair value of our investment in Monster LP mainly due to revised cash flow projections and an increase in the discount rate applied to those forecasts.

The revisions to the financial projections were due to the deterioration in Monster LP's financial condition and continued underperformance compared with prior projections.

There was no activity recorded for this investment for the years ended December 31, 2021 and 2020.

The revisions to the financial projections 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.

There was no activity recorded for this investment for the year ended December 31, 2021.

The fair value of both of these investments was $ 0.0 million as of December 31, 2021 and 2020.

Other Equity Investments

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

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes other equity investment activity for the years ended December 31, 2021 and 2020 (in thousands):

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

Impairment of investments included in earnings ( 6,684 )

Upward adjustment for observable price change 89,083

Foreign currency translation

Balance as of December 31, 2021 $ 119,541

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.

We hold a 2.4 % non-controlling equity interest in SumUp Holdings S.a.r.l.

("SumUp"), a privately-held mobile payments company.

During the third quarter 2021 and fourth quarter 2019, we adjusted the carrying value of our other equity investment in SumUp due to observable price changes in orderly transactions, which resulted in unrealized gains of $ 89.1 million and $ 51.4 million for the years ended December 31, 2021 and December 31, 2019.

These unrealized gains are classified within Other income (expense), net on the consolidated statements of operations.

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

During the third quarter 2021, we also sold 100 % of our shares in one of our other equity investments for total cash consideration of $ 2.6 million and recognized a gain of $ 2.2 million.

In the second quarter 2021, we divested our shares in one of our other equity investments and recognized a gain and total cash consideration of $ 4.2 million.

The gains on our investments have been presented in Other income (expense), net in the consolidated statements of operations for the year ended December 31, 2021.

During the first quarter 2020, we recorded a $ 6.7 million impairment to one of our other equity method investments 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.

6 unchanged sentences

Changes in fair value of investments 95,623 ( 8,089 ) ( 31,061 )

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

Impairments of investments ( 6,684 ) ( 9,961 ) ( 10,156 )

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

Other 43 ( 459 ) 2,026

Loss on extinguishment of debt ( 5,090 ) — —

Foreign currency gains (losses), net and other (1)

14,237 17,962 ( 6,419 )

Other income (expense), net $ 92,680 $ ( 16,968 ) $ ( 53,329 )

(1) Includes a $ 32.3 million cumulative foreign currency translation adjustment gain that was reclassified into earnings during the first quarter of 2021 as a result of the substantial liquidation of our subsidiary in Japan as part of our restructuring actions.

See Note 14, Restructuring and Related Charges , for additional information.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes prepaid expenses and other current assets as of December 31, 2021 and 2020 (in thousands):

Merchandise inventories $ 1,280 $ 25,426

Prepaid expenses $ 28,550 $ 18,038

Income taxes receivable 7,711 5,437

Deferred cloud implementation cost 6,476 4,942

Other 9,833 12,024

Total prepaid expenses and other current assets $ 52,570 $ 40,441

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

The following table summarizes other non-current assets as of December 31, 2021 and 2020 (in thousands):

Debt issue costs, net 660 1,852

1 unchanged sentence

Deferred cloud implementation costs (1)

11,986 10,402

Other 5,376 5,165

1 unchanged sentence

(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, 2021 and 2020 (in thousands):

8 unchanged sentences

Refund reserve (1)

$ 19,601 $ 33,173

Compensation and benefits 30,367 54,958

4 unchanged sentences

Deferred revenue 3,523 11,223

Deferred payroll taxes (1)

Operating and finance lease obligations 32,663 37,755

Deferred cloud computing contract incentive 3,000 3,000

Other 54,055 70,544

43,751 56,977

Total accrued expenses and other current liabilities $ 239,313 $ 294,999

(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.

(1) In 2020, we experienced increased refund levels due to the impacts of COVID-19 which impacted our refund reserve estimate.

(2) Includes $ 2.7 million as of December 31, 2021 and $ 2.9 million as of December 31, 2020 in certain payroll taxes under the Coronavirus Aid, Relief and Economic Security ("CARES") Act.

The 2020 balance was paid in the fourth quarter 2021.

The 2021 balance is due by December 31, 2022.

The following table summarizes other non-current liabilities as of December 31, 2021 and 2020 (in thousands):

Contingent income tax liabilities $ 24,213 $ 25,593

Finance lease obligations 730 5,831

Restructuring-related liabilities 385 —

Deferred income taxes 2,802 3,170

Deferred payroll taxes (1)

Deferred cloud computing contract incentive 1,250 4,250

Other 7,378 5,132

Total other non-current liabilities $ 34,448 $ 44,428

(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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 Total

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

Other comprehensive income (loss) before reclassification adjustments 3,332 ( 841 ) 2,491

Reclassification adjustments included in net income (loss) — 106 106

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

Other comprehensive income (loss) before reclassification adjustments 4,858 ( 379 ) 4,479

Reclassification adjustments included in net income (loss) — — —

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

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

Other comprehensive income (loss) before reclassification adjustments ( 35,972 ) — ( 35,972 )

Reclassification adjustments included in net income (loss) — — —

Other comprehensive income (loss) ( 35,972 ) — ( 35,972 )

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

(1) Includes $ 2.9 million as of December 31, 2020 in certain payroll taxes under the Coronavirus Aid, Relief and Economic Security ("CARES") Act.

The 2020 balance is due December 31, 2022.

FINANCING ARRANGEMENTS

Convertible Senior Notes

On April 4, 2016, we issued $ 250.0 million in aggregate principal amount of convertible senior notes (the "Notes") in a private placement to A-G Holdings, L.P.

Michael Angelakis, the chairman and chief executive officer of Atairos Group, Inc.

("Atairos"), joined our Board of Directors (the "Board") in connection with the issuance of the Notes.

Atairos controls the voting power of AGH.

The net proceeds from this offering were $ 243.2 million after deducting issuance costs.

The Notes bear interest at a rate of 3.25 % per annum, payable annually in arrears on April 1 of each year, beginning on April 1, 2017.

The Notes will mature on April 1, 2022, subject to earlier conversion or redemption.

Each $ 1,000 of principal amount of the Notes initially is convertible into 9.25926 shares of common stock, which is equivalent to an initial conversion price of $ 108.00 per share, subject to adjustment upon the occurrence of specified events.

Upon conversion, we can elect to settle the conversion value in cash, shares of our common stock, or any combination of cash and shares of our common stock.

Holders of the Notes may convert their Notes at their option at any time until the close of business on the scheduled trading day immediately preceding the maturity date.

In addition, if specified corporate events occur prior to the maturity date, we may be required to increase the conversion rate for holders who elect to convert based on the effective date of such event and the applicable stock price attributable to the event, as set forth in a table contained in the indenture governing the Notes (the "Indenture").

Based on the closing price of the common stock of $ 37.99 as of December 31, 2020, the if-converted value of the Notes was less than the principal amount.

With certain exceptions, upon a fundamental change (as defined in the Indenture), the holders of the Notes may require us to repurchase all or a portion of their Notes for cash at a purchase price equal to the principal amount plus accrued and unpaid interest.

In addition, we may redeem the Notes, at our option, at a purchase price equal to the principal amount plus accrued and unpaid interest on or after April 1, 2020, if the closing sale price of the common stock exceeds 150 % of the then-current conversion price for 20 or more trading days in the 30 consecutive trading-day period preceding the exercise of this redemption right.

The Notes are senior unsecured obligations that rank equal in right of payment to all senior unsecured indebtedness and rank senior in right of payment to any indebtedness that is contractually subordinated to the Notes.

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

Adoption of ASU 2020-06

On January 1, 2021, we early adopted ASU 2020-06 using the modified retrospective method.

The ASU eliminates the requirement to separately recognize an equity component when accounting for convertible debt that may be cash-settled upon conversion or convertible instruments with a beneficial conversion feature.

Beginning January 1, 2021, our consolidated financials are presented in accordance with ASU 2020-06, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies.

The new guidance changed the accounting for our 3.25 % Convertible Senior Notes, due 2022, as discussed below.

3.25 % Convertible Senior Notes due 2022

In April 2016, we issued $ 250.0 million in aggregate principal amount of convertible senior notes (the "Atairos Notes") in a private placement to A-G Holdings, L.P.

In May 2021, we repurchased the Atairos Notes for an

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.

We have separated the Notes into their liability and equity components in the accompanying consolidated balance sheets.

The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated conversion feature.

The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the principal amount of the Notes.

The difference between the principal amount of the Notes and the liability component (the "debt discount") is amortized to interest expense at an effective interest rate of 9.75 % over the term of the Notes.

The equity component of the Notes is included in additional paid-in capital in the consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification.

We incurred transaction costs of approximately $ 6.8 million related to the issuance of the Notes.

Those transaction costs were allocated to the liability and equity components in the same manner as the allocation of the proceeds from the Notes.

Transaction costs attributable to the liability component of $ 4.8 million were recorded as a debt discount in the consolidated balance sheet and are being amortized to interest expense over the term of the Notes.

aggregate purchase price equal to $ 255.0 million, consisting of the $ 250.0 million outstanding principal amount, $ 1.0 million of accrued interest through the repurchase date and a $ 4.0 million prepayment penalty.

In the second quarter 2021, we recognized a $ 5.1 million loss on the early extinguishment of the Atairos Notes, which is presented in Other income (expense), net on the consolidated statements of operations.

Prior to the adoption of ASU 2020-06, we separated the Atairos Notes into their liability and equity components.

The liability was initially calculated by measuring the fair value of similar liability without an associated conversion feature.

The difference between the principal amount of the Atairos Notes and the liability component was recognized in equity, effectively resulting in a debt discount.

We incurred transactions costs of $ 6.8 million related to the issuance of the Atairos Notes.

Transaction costs attributable to the liability component of $ 4.8 million were also recorded as a debt discount in the consolidated balance sheets.

The debt discount was amortized to interest expense over the terms of the Atairos Notes.

Together with cash interest, this resulted in an effective interest rate of 9.75 %.

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

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

Following the adoption of ASU 2020-06, the previously bifurcated equity component of our Atairos Notes was recombined with the liability component, resulting in a single liability-classifed instrument.

The carrying value of the Atairos Notes at the transition was determined by recalculating the basis of the notes as if the conversion option had not been bifurcated at issuance.

Transaction costs related to the issuance of the Atairos Notes that were allocated to the equity component were reclassified out of Additional paid-in capital and the amortization and the related debt discount associated with these costs was recalculated through the transition date.

This resulted in an effective interest rate of 3.76 %.

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

December 31, 2020

Liability component:

Principal amount $ 250,000

debt discount ( 20,510 ) ( 35,131 )

debt discount - transaction costs ( 1,459 )

debt discount - equity ( 19,051 )

Net carrying amount of liability component $ 229,490

Net carrying amount of equity component $ 67,014

The estimated fair value of the Notes as of December 31, 2020 and 2019 was $ 263.3 million and $ 262.7 million, and was determined using a lattice model.

We classified the fair value of the Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the Notes and our cost of debt.

As of December 31, 2020, the remaining term of the Notes is approximately 1 years and 3 months.

During the years ended December 31, 2020, 2019 and 2018, we recognized interest costs on the Notes as follows (in thousands):

We classified the fair value of the Atairos Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the terms of the Atairos Notes and our cost of debt.

The estimated fair value of the Atairos Notes as of December 31, 2020 was $ 263.3 million, and was determined using a lattice model.

During the years ended December 31, 2021, 2020 and 2019, we recognized interest costs on the Atairos Notes as follows (in thousands):

Year Ended December 31,

6 unchanged sentences

In May 2016, we purchased convertible note hedges with respect to our common stock for a cost of $ 59.1 million from certain bank counterparties.

The convertible note hedges provide us with the right to purchase up to 2.3 million shares of our common stock at an initial strike price of $ 108.00 per share, which corresponds to the initial conversion price of the Notes, and are exercisable upon conversion of the Notes.

The convertible note hedges are intended to reduce the potential economic dilution upon conversion of the Notes.

The convertible note hedges are separate transactions and are not part of the terms of the Notes.

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

The convertible note hedges were intended to reduce the potential economic dilution upon conversion of the Atairos Notes.

We also sold warrants for total cash proceeds of $ 35.5 million to certain bank counterparties.

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.

The warrants provide the counterparties with the right to purchase up to 2.3 million shares of our common stock at a strike price of $ 170.00 per share.

The warrants expire on various dates between July 1, 2022 and August 26, 2022 and are exercisable on their expiration dates.

The warrants are separate transactions and are not part of the terms of the Notes or convertible note hedges.

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

The amounts paid and received for the convertible note hedges and warrants were recorded in additional paid-in capital in the consolidated balance sheets as of December 31, 2020 and 2019.

The convertible note hedges and warrants are not remeasured as long as they continue to meet the conditions for equity classification.

The amounts paid for the convertible note hedges are tax deductible over the term of the Notes, while the proceeds received from the warrants are not taxable.

Under the if-converted method, the shares of common stock underlying the conversion option in the Notes are included in the diluted earnings per share denominator and the interest expense on the Notes, net of tax, is added to the numerator.

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 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.

The amounts paid and received for the convertible note hedges and warrants were recorded in Additional paid-in capital in the consolidated balance sheets as of December 31, 2020.

The convertible note hedges and warrants were not remeasured as long as they continue to meet the condition for equity classification.

The amounts paid for the convertible note hedges were tax deductible over the term of the Atairos Notes, while the proceeds received from the warrants were not taxable.

Under the if-converted method, the shares of common stock underlying the conversion option in the Atairos Notes are included in the diluted income (loss) per share denominator and the interest expense and amortization of the transaction costs on the Atairos Notes, net of tax, is added to the numerator.

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

In connection with the repurchase of the Atairos Notes, we entered into agreements (collectively "the Unwind Agreements") with each of the bank counterparties in May 2021 to unwind the convertible note hedges and warrants.

Pursuant to the terms of the Unwind Agreements, we received cash proceeds of $ 2.3 million for the settlement of the convertible note hedges and paid cash consideration of $ 1.3 million for the settlement of the warrants.

1.125 % Convertible Senior Notes due 2026

In March and April 2021, we issued $ 230.0 million aggregate principal amount of convertible senior notes due 2026 (the "2026 Notes") in a private offering to qualified institutional buyers.

The net proceeds from this offering were $ 222.1 million.

The 2026 Notes bear interest at a rate of 1.125 % per annum, payable semiannually in arrears on March 15 and September 15 of each year, which began on September 15, 2021.

The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion.

We used $ 27.4 million of the net proceeds from the offering to pay the cost of certain related capped call transactions and used the remaining net proceeds, together with cash on hand, to repurchase the Atairos Notes.

Each $1,000 of principal amount of the 2026 Notes initially is convertible into 14.6800 shares of common stock, which is equivalent to an initial conversion price of $ 68.12 per share, subject to adjustment upon the occurrence of specified events.

In addition, upon the occurrence of a make-whole fundamental change, as defined in the Indenture governing the 2026 Notes (the "Indenture"), or if we issue a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2026 Notes in connection with such make-whole fundamental change or redemption.

Upon conversion, we can elect to settle the conversion value in cash, shares of our common stock, or any combination of cash and shares of our common stock.

Subject to certain conditions, holders of the 2026 Notes may convert the 2026 Notes at their option at any time until the close of business on the scheduled trading day immediately preceding the maturity date.

Based on the closing price of the common stock of $ 23.16 as of December 31, 2021, the if-converted value of the 2026 Notes was less than the principal amount.

Certain conditions apply to the conversion by holders and redemption by us of the 2026 Notes, which are set forth in the Indenture governing the 2026 Notes.

In addition, upon the occurrence of a fundamental change (as defined in the Indenture) prior to the maturity date, holders may require us to repurchase all or a portion of the 2026 Notes for cash.

The 2026 Notes are our senior unsecured obligations and will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2026 Notes;

equal in right of payment to any of our unsecured indebtedness that is not so subordinated;

effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness;

and structurally junior to all indebtedness and other liabilities of current or future subsidiaries (including trade payables).

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 2026 Notes and any accrued and unpaid interest may be declared immediately due and payable.

In the case of bankruptcy or insolvency, the principal amount of the 2026 Notes and any accrued and unpaid interest would automatically become immediately due and payable.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We account for the 2026 Notes as a single liability-classified instrument measured at amortized cost due to the adoption of ASU 2020-06.

The carrying value of the 2026 Notes was determined by deducting transaction costs incurred in connection with the issuance of the 2026 Notes of $ 7.8 million from the principal amount.

Those transaction costs were recorded as a debt discount in the consolidated balance sheets and are amortized to interest expense.

Together with the cash interest, this results in an effective interest rate of 1.83 % over the term of the 2026 Notes.

We have presented the 2026 Notes in non-current liabilities in the accompanying consolidated balance sheets.

The carrying amount of the 2026 Notes consisted of the following as of December 31, 2021 (in thousands):

December 31, 2021

Principal amount $ 230,000

debt discount ( 6,597 )

Net carrying amount of liability $ 223,403

We classified the fair value of the 2026 Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the 2026 Notes and our cost of debt.

The estimated fair value of the 2026 Notes as of December 31, 2021 was $ 183.3 million and was determined using a lattice model.

During the years ended December 31, 2021, we recognized interest costs on the 2026 Notes as follows (in thousands):

Year Ended December 31, 2021

Contractual interest $ 2,001

Amortization of debt discount 1,150

Total $ 3,151

Capped Call Transactions

In March and April 2021, in connection with the offering of the 2026 Notes, we entered into privately-negotiated capped call transactions with each of Barclays Bank PLC, BNP Paribas and Mizuho Markets Americas LLC.

The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the 2026 Notes.

The capped call transactions are expected generally to reduce potential dilution to our common stock upon any conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, with such reduction and/or offset subject to a cap initially equal to $ 104.80 (which represents a premium of 100 % over the last reported sale price of our common stock on The Nasdaq Global Select Market on March 22, 2021), subject to certain adjustments under the terms of the capped call transactions.

The capped call transactions are accounted for as freestanding derivatives and recorded at the initial fair value, net of tax, in Additional paid-in-capital in the consolidated balance sheets with no recorded subsequent change to fair value as long as they meet the criteria for equity classification.

Under the if-converted method, the shares of common stock underlying the conversion option in the 2026 Notes are included in the diluted income (loss) per share denominator and the interest expense and amortization of the debt discount on the 2026 Notes, net of tax, are added to the numerator.

However, upon conversion, there will be minimized economic dilution from the 2026 Notes, as exercise of the capped call transactions reduces dilution from the 2026 Notes that would have otherwise occurred when the price of our common stock exceeds the conversion price.

The capped call transactions are intended to offset actual dilution from the conversion of the 2026 Notes and to effectively increase the overall conversion price from $ 68.12 to $ 104.80 per share.

Revolving Credit Agreement

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.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

In March 2021, we entered into a second amendment to the revolving credit agreement (the "Second Amendment," together with the First Amendment, the "Amendments") to extend the suspension period provided by the First Amendment through the fourth quarter 2021 (unless terminated by us prior to then) (the "Suspension Period"), amend and remove certain financial covenants applicable after the amended Suspension Period ends and permit the issuance of the 2026 Notes and related capped call transactions.

We collectively refer to the revolving credit agreement as amended by the Amendments as the "Amended Credit Agreement").

We voluntarily elected to early terminate the Suspension Period as of the third quarter of 2021.

We deferred debt issuance costs of $ 3.5 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.

Deferred debt issuance costs are included within Other non-current assets on the consolidated balance sheets as of December 31, 2021 and are amortized to interest expense over the term of the respective agreement.

Pursuant to the Amendments, during the Suspension Period, we were exempt from certain covenant restrictions, namely the requirements to maintain a maximum funded indebtedness to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") ratio and a minimum liquidity balance (including any undrawn amounts under the credit facility) of at least 70.0 % of our accrued merchant and supplier payables balance (which covenant applies again beginning in the third quarter 2021 following our voluntary early termination on the Suspension Period).

Additionally, the Amendments provide that, during the Suspension Period, we were 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 100.0 % of our accrued merchant and supplier payables balance for such month plus $ 50.0 million.

The Second Amendment also permanently removes requirements that we maintain (i) a maximum senior secured indebtedness to EBITDA ratio and (ii) unrestricted cash of not less than $ 250.0 million.

Finally, the Second Amendment changes the requirement to maintain a minimum fixed charge coverage ratio to a requirement to maintain a minimum interest coverage ratio.

Following our voluntary early termination of the Suspension Period, we are subject to the ordinary course covenants under the Amended Credit Agreement beginning in the third quarter 2021.

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:

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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)

The Amendments 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.

As of December 31, 2021, we were in compliance with the applicable covenants under our Amended Credit Agreement.

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.

The Amendments also increased interest rates through the end of the Suspension Period (i.e., through the third quarter 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 0.40 % 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 also includes a replacement mechanism for the discontinuation of the adjusted LIBO rate.

In addition, the Amended Credit Agreement 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.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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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.

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 had $ 100.0 million of outstanding borrowings and $ 25.8 million of letters of credit outstanding as of December 31, 2021, and $ 200.0 million of outstanding borrowings and $ 20.6 million of letters of credit outstanding as of December 31, 2020 under the Amended Credit Agreement.

Our operating leases primarily consist of leases for real estate throughout the world with lease expirations between 2022 and 2027.

These arrangements typically do not transfer ownership of the underlying asset as we do not assume, nor do we intend to assume, the risks and rewards of ownership.

Our finance leases are related to purchases of property and equipment, primarily computer hardware, with expirations between 2021 and 2023.

We have also subleased certain office facilities under operating lease agreements, with expirations between 2023 and 2026.

We lease our headquarters located in Chicago, Illinois ("600 West Chicago").

Our lease agreement for 600 West Chicago extends through January 31, 2026 and includes rent escalations that range from one to two percent per year, as well as expansion options and a five-year renewal option.

The 600 West Chicago lease represents $ 66.8 million of the estimated future payments under operating leases shown in the table below.

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.

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.

Our finance leases are related to property and equipment, primarily computer hardware, all of which expire in 2022.

We lease our headquarters located in Chicago, Illinois ("600 West Chicago") through January 31, 2026.

We sublease a portion of that space 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)

We have also subleased other office facilities under operating lease agreements with expirations between 2023 and 2026 that are not significant.

The following summarizes right-of-use assets as of December 31, 2021 and 2020 (in thousands):

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

21,523 28,193

Total right-of-use assets, gross 95,233 129,032

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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.

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):

Due to actions taken under our restructuring plan, we recognized impairment of $ 6.8 million and $ 16.0 million related to related to right-of-use assets - operating leases for the years ended December 31, 2021 and 2020, which are presented in Restructuring and related charges on the consolidated statement of operations.

See Note 3, COVID-19 Pandemic and Note 14, Restructuring and Related Charges for more information.

Due to the circumstances described in Note 3, COVID-19 Pandemic , we recognized long-lived asset impairments related to right-of-use assets - operating leases of $ 10.5 million and right-of-use assets - finance leases of $ 1.3 million within our International segment related to our EMEA operations for the year ended December 31, 2020, which are presented in Long-lived asset impairments on the consolidated statements of operations.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes our lease costs and sublease income for the years ended December 31, 2021, 2020 and 2019 (in thousands):

Year Ended December 31,

2021 2020 2019

Financing lease cost:

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Variable lease cost (2)

6,378 8,143 8,551

Short-term lease cost 83 313 365

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Total lease cost $ 30,898 $ 41,892 $ 58,211

(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)

(1) Operating lease costs presented as Selling, general and administrative and Restructuring and related charges in the consolidated statements of operations totaled $ 17.6 million and $ 7.8 million for the year ended December 31, 2021 and $ 23.1 million and $ 7.8 million for the year ended December 31, 2020.

(2) Variable lease costs presented as Selling, general and administrative and Restructuring and related charges in the consolidated statements of operations totaled $ 4.7 million and $ 1.7 million for the year ended December 31, 2021 and $ 7.0 million and $ 1.1 million for the year ended December 31, 2020.

(3) Sublease income, gross presented as Selling, general and administrative and Restructuring and related charges in the consolidated statements of operations totaled $ 0.0 million and $ 4.6 million for the year ended December 31, 2021 and $ 1.2 million and $ 3.5 million for the year ended December 31, 2020.

As of December 31, 2021, the future payments under finance leases and operating leases for each of the next five years and thereafter are as follows (in thousands):

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2025 — 16,078

2025 — 16,175

Thereafter — 82

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Total long-term lease obligations $ — $ 58,747

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

As of December 31, 2021, we do not have any material non-cancelable operating lease commitments that have not yet commenced.

As of December 31, 2021, the weighted-average remaining lease term and weighted-average discount rate for our finance leases and operating leases were as follows:

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Weighted-average discount rate 4.9 % 5.4 %

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2021, the future amounts due under subleases for each of the next five years and thereafter are as follows (in thousands):

Total future sublease income $ 14,380

COMMITMENTS AND CONTINGENCIES

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Total purchase obligations $ 107,007

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Legal Matters and Other Contingencies

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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.

Plaintiff seeks unspecified compensatory damages and attorneys' fees.

Discovery has now commenced in this matter.

We intend to continue to vigorously defend the case, which we believe to be without merit.

In addition, three shareholders have filed separate shareholder derivative lawsuits in relation to the same events that are the subject of the securities litigation described above (collectively, the “Derivative Lawsuits”).

First, on September 9, 2021, a shareholder named Jonathan Frankel filed a federal derivative lawsuit in the United States District Court for District of Delaware.

Second, on January 19, 2022, a shareholder named Alyssa Estreen filed a derivative lawsuit in the Court of Chancery in the State of Delaware.

Finally, on January 24, 2022, a shareholder named Saman Khoury filed a derivative lawsuit, also in the Court of Chancery in the State of Delaware.

All three lawsuits name Groupon and certain of the Company's former and current officers and directors.

The allegations in all three Derivative Lawsuits relate to the same time period and events that are the subject of the Securities Lawsuit and allege that the Company and its shareholders have sustained damages as a result of the conduct of certain current and former officers and directors.

The Plaintiffs in each of these Derivatives Lawsuits seek unspecified damages they allege were sustained by the Company, injunctive and equitable relief and attorneys' fees.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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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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 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.

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We estimate that the total amount of obligations that are reasonably possible to arise under the indemnifications in excess of amounts accrued as of December 31, 2021 is approximately $ 11.7 million.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2021, 2020 and 2019, we recognized $ 0.0 million , $ 0.4 million and $ 2.6 million in income (loss) from discontinued operations, net of tax primarily for gains related to the expiration of certain contingent liabilities under indemnification agreements.

In the normal course of business to facilitate transactions related to our operations, we indemnify certain parties, including employees, lessors, service providers, merchants, and counterparties to investment agreements and asset and stock purchase agreements with respect to various matters.

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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, 2021 and 2020, 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.

Pursuant to our restated certificate of incorporation, as of December 31, 2021, the Board had the authority to issue up to a total of 100,500,000 shares of common stock.

Each holder of common stock is entitled to one vote per share on any matter that is submitted to a vote of stockholders.

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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, 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 Amended Credit Agreement, share price, available cash and other factors, and the share repurchase program may be terminated at any time.

During the year ended December 31, 2021, we did no t repurchase any shares under the program.

As of December 31, 2021, $ 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,

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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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In April 2010, we established the Groupon, Inc.

2010 Stock Plan, as amended in April 2011 (the "2010 Plan"), under which options and restricted stock units ("RSUs") for up to 1,000,000 shares of common stock were authorized for future issuance to employees, consultants and directors.

2010 Stock Plan (the "2010 Plan"), as amended in April 2011, under which options and restricted stock units ("RSUs") for up to 1,000,000 shares of common stock were authorized for future issuance to employees, consultants and directors.

No new awards may be granted under the 2010 Plan following our initial public offering in November 2011.

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Restructuring and related charges — 1,735 —

Other income (expense), net — — 100

Total stock-based compensation expense $ 33,169 $ 40,745 $ 81,615

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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.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The table below summarizes Performance Share Unit activity under the Plans for the year ended December 31, 2021:

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

Granted 96,598 15.44 — —

41,729 15.44 — —

Vested ( 90,006 ) 26.46 — —

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37,763 57,668

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Performance Share Units granted during the year ended December 31, 2021 relate to the issuance of incremental shares upon the Compensation Committee's certification of the achievement of the 2020 performance metrics.

As of December 31, 2021, $ 0.1 million of unrecognized compensation costs related to unvested Performance Share Units are expected to be recognized over a remaining weighted-average period of 0.99 years.

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

Defined Contribution Plans

We have a 401(k) defined contribution retirement savings plan covering substantially all domestic employees.

Each participant may elect to defer a portion of his or her compensation subject to certain limitations.

We contribute up to 50 % of the first 6 % of eligible compensation contributed to the plan, subject to a 3 year graded vesting schedule.

We also have several foreign defined contribution plans, which require us to contribute a percentage of participating employee's salary according to local regulations.

During the years ended December 31, 2021, 2020 and 2019, our contributions for all plans were $ 6.7 million, $ 6.6 million and $ 9.4 million.

REVENUE RECOGNITION

We recognize revenue when we satisfy a performance obligation by transferring a promised good or service to a customer.

Substantially all of our performance obligations are satisfied at a point in time rather than over time.

We offer goods and services through our online marketplaces in three primary categories:

Local, Goods and Travel.

See Note 19, 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.

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 relates to product sales and gift card revenue.

Revenue for product sales is recognized as the products are delivered to customers, generally within two weeks following the balance sheet date, while revenue for gift cards is recognized upon customer redemption.

Our deferred revenue was $ 3.5 million as of December 31, 2021.

As of December 31, 2020 and 2019, our deferred revenue was $ 11.2 million and $ 18.0 million, all of which was recognized during the years ended December 31, 2021 and 2020, respectively.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2021 and 2020 (in thousands):

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Balance as of December 31, 2021 $ 56,558

(1) 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.

(2) The increase in our breakage revenue recognized is largely due to a change in estimate due to lower customer usage patterns since the onset of COVID-19.

Cost of Obtaining Contracts

Deferred contract acquisition costs are presented within the following line items of the consolidated balance sheets as of December 31, 2020 and 2019 (in thousands):

Prepaid expenses and other current assets $ 1,009 $ 2,501

Other non-current assets 5,315 10,133

Deferred contract acquisition costs are presented in Prepaid expenses and other current assets and Other non-current assets on the consolidated balance sheets.

As of December 31, 2021 and 2020, deferred contract acquisition costs were $ 8.0 million and $ 6.3 million.

The amortization of deferred contract acquisition costs is classified within Selling, general and administrative expense in the consolidated statements of operations.

For the years ended December 31, 2021, 2020 and 2019, we amortized $ 10.5 million, $ 15.3 million and $ 20.4 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)

Allowance for Expected Credit Losses on Accounts Receivable

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Allowance for Expected Credit Losses

Balance as of January 1, 2020 $ 3,693

Balance as of December 31, 2019 $ 3,693

Change in provision 9,631

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Balance as of December 31, 2020 $ 9,756

Change in provision ( 28 )

Write-offs ( 1,875 )

Foreign currency translation 121

Balance as of December 31, 2021 $ 7,974

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Variable Consideration for Unredeemed Vouchers

During the year ended December 31, 2021, we recognized $ 31.4 million of variable consideration from unredeemed vouchers that were sold in a prior year.

We have observed redemption rates lower than our historical estimates for vouchers sold at the onset of the COVID-19 pandemic, the substantial majority of which reached expiration during the year ended December 31, 2021.

Although redemption rates for vouchers sold in more recent periods have improved, the impact of COVID-19 on redemption behavior in future periods is still uncertain.

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

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.

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.

We have incurred total pretax charges of $ 106.7 million since the inception of the restructuring plan.

Our actions under the plan are substantially complete and we expect any future charges or credits will be from changes in estimates.

Our restructuring plan included workforce reductions of approximately 1,600 positions globally, the exit or discontinuation of the use of certain leases and other assets, impairments of our right-of-use and other long-lived assets, and the exit of our operations in New Zealand and Japan.

In the first quarter 2021, we substantially liquidated our subsidiary in Japan and reclassified $ 32.3 million of cumulative foreign currency translation gains into earnings, which is presented in Other income (expense), net on the consolidated statements of operations for the year ended December 31, 2021.

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):

The following tables summarize costs incurred by segment related to the restructuring plan for the years ended December 31, 2021 and 2020 (in thousands):

Year Ended December 31, 2021

Employee Severance and Benefit Costs (1)

Legal and Advisory Costs Property, Equipment and Software Impairments (2)

Right-of-Use Asset Impairments and Lease-related Charges (3)

Total Restructuring Charges

Employee Severance and Benefit Costs (Credits) Legal and Advisory Costs Property, Equipment and Software Impairments Right-of-Use Asset Impairments and Lease-related Charges (Credits) Total Restructuring Charges (Credits)

North America $ 458 $ 1,696 $ 602 $ 7,278 $ 10,034

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Consolidated $ 28,803 $ 2,377 $ 870 $ 9,845 $ 41,895

(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.

Year Ended December 31, 2020

North America $ 17,322 $ 1,308 $ 5,322 $ 13,775 $ 37,727

International 20,679 829 291 5,310 27,109

Consolidated $ 38,001 $ 2,137 $ 5,613 $ 19,085 $ 64,836

As a part of our restructuring plan, we terminated or modified several of our leases.

In other cases we vacated our leased facilities, and some of those facilities are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.

For the year ended December 31, 2021, we recognized $ 5.5 million and $ 2.2 million of long-lived asset impairment in our North America and International segments due to actions taken under our restructuring plan.

For the year ended December 31, 2020, we recognized $ 18.1 million and $ 3.5 million of long-lived asset impairment in our North America and International segments due to actions taken under our restructuring plan.

See Note 3, COVID-19 Pandemic, Note 4, Property, Equipment and Software, Net and Note 9, Leases for additional information.

Rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income, termination and modification gains and losses, 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.

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, 2021 and 2020 (in thousands):

1 unchanged sentence

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

$ 699 $ — $ 699

Charges payable in cash 28,803 2,376 31,179

36,266 2,137 38,403

Cash payments ( 30,100 ) ( 2,897 ) ( 32,997 )

1 unchanged sentence

Balance as of December 31, 2021 (3)

$ 11,038 $ 311 $ 11,349

(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.

(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.

(3) Includes employee severance and benefit costs related to the termination of employees.

Substantially all of the remaining cash payments for those costs are expected to be disbursed through 2022.

The components of pretax income (loss) from continuing operations for the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):

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Income (loss) before provision (benefit) for income taxes $ 88,025 $ ( 294,066 ) $ ( 13,531 )

The provision (benefit) for income taxes for the years ended December 31, 2020, 2019 and 2018 was allocated between continuing operations and discontinued operations as follows (in thousands):

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, 2021, 2020 and 2019 consisted of the following components (in thousands):

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Provision (benefit) for income taxes $ ( 32,323 ) $ ( 7,504 ) $ 761

All of the provision (benefit) for income taxes of $( 32.3 ) million, $( 7.5 ) million and $ 0.8 million for the years ended December 31, 2021, 2020 and 2019 was related to continuing operations.

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.

8 unchanged sentences

Effect of income tax rate changes on deferred items 815 618 ( 3,443 )

Tax effects of intercompany transactions — — 607

Adjustments related to uncertain tax positions 2,588 ( 15,518 ) ( 12,418 )

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Forgiveness of intercompany liabilities ( 62 ) ( 2,863 ) 67

Ordinary stock loss — — ( 11,815 )

Net operating loss expiration — 19,962 12,537

Goodwill impairment — 23,202 —

Observable price change on an other equity investment ( 17,955 ) — ( 8,644 )

Non-deductible or non-taxable items 4,035 4,557 2,908

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federal statutory rate through December 31, 2021.

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.

(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.

The amount of State income taxes, net of federal benefits, and state tax credits, Change in valuation allowances and Non-deductible or non-taxable items for the year ended December 31, 2018 have been updated from $ 2.0 million, $ 3.8 million and $ 7.3 million previously reported to reflect that change.

This resulted in an adverse impact to the provision (benefit) for income taxes in this rate reconciliation for the years ended December 31, 2021, 2020 and 2019 prior to the impact of valuation allowances, due to the net pretax losses from continuing operations in certain foreign jurisdictions with lower tax rates.

GROUPON, INC.

8 unchanged sentences

Investments 20,581 24,885

Convertible senior notes 5,929 —

Unrealized foreign currency exchange losses 1,078 1,244

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Net deferred tax asset (liability) $ 60,143 $ 8,423

We have incurred significant losses in recent periods and had an accumulated deficit of $ 1,320.9 million as of December 31, 2020.

As a result, we maintained valuation allowances against our domestic deferred tax assets and substantially all of our foreign deferred tax assets as of December 31, 2020 and 2019 to reduce their carrying values to amounts that are realizable either through future reversals of existing taxable temporary differences or through taxable income in carryback years for the applicable jurisdictions.

We recognize deferred tax assets to the extent that they will be realizable through future reversals of existing taxable temporary differences, through taxable income in carryback years for the applicable jurisdictions or based on projections of future income for those jurisdictions that have achieved sustained profitability.

In evaluating the need for a valuation allowance, management considers both positive and negative evidence that could affect its view of the future realization of deferred tax assets and places greater weight on recent and objectively verifiable current information.

As of December 31, 2021, we have demonstrated sustained profitability and are forecasting pre-tax earnings in the U.S., which have been considered to be sources of positive evidence.

In analyzing all available evidence, management determined there is sufficient positive evidence outweighing negative evidence to conclude that it is more likely than not that a portion of the U.S.

deferred tax assets is realizable.

As a result, we released $ 57.7 million of the valuation allowance against our federal and state deferred tax assets, resulting in a $ 50.3 million reduction to expense, and a $ 7.4 million adjustment to equity.

We continue to maintain a valuation allowance in the U.S.

against capital losses, deferred tax assets that will convert into capital losses upon reversal, and state credits that we are not expecting to be able to realize, and substantially all of our foreign deferred tax assets.

We had $ 22.0 million of federal net operating loss carryforwards as of December 31, 2021 which will begin expiring in 2027.

We had $ 77.5 million of state net operating loss carryforwards as of December 31, 2020, which began expiring in the current period.

We had $ 61.7 million of state net operating loss carryforwards as of December 31, 2021, which will begin expiring in 2023.

As of December 31, 2021, we had $ 489.8 million of foreign net operating loss carryforwards, a significant portion of which carry forward for an indefinite period.

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Determination of the amount of unrecognized deferred tax liability related to the excess of the financial reporting basis over the tax basis of our foreign subsidiaries is not practical due to the complexities associated with the calculation .

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.

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.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

VARIABLE INTEREST ENTITY

2 unchanged sentences

Our obligations associated with our interests in the LLC are primarily administering transactions, contributing intellectual property, identifying deals and promoting the sale of deal offerings, coordinating the distribution of deal offerings and providing the record keeping.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Under the LLC agreement, as amended, the LLC shall be dissolved upon the occurrence of any of the following events:

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Fair value option investments and available-for-sale securities.

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.

We also have investments in redeemable preferred shares.

We have fair value option investments and available-for-sale securities that we measure using the income approach.

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

We have classified these investments as Level 3 due to the lack of observable market data over fair value inputs such as cash flow projections and discount rates.

Contingent consideration.

During the first quarter 2021, we settled a contingent consideration arrangement to the former owners of a business previously acquired in 2018.

We use the income approach to value contingent consideration obligations based on future financial performance.

We have previously classified our contingent consideration as Level 3 due to the lack of relevant observable market data over fair value inputs such as probability-weighting of payment outcomes.

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.

We are subject to a contingent consideration arrangement to transfer a maximum payout in cash of $ 2.5 million to the former owners of a business acquired on April 30, 2018.

See Note 5, Business Combinations , for further discussion of that acquisition.

The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements for the years ended December 31, 2021, 2020 and 2019 (in thousands):

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$ — $ ( 1,405 ) $ ( 72,497 )

Available-for-sale securities

Convertible debt securities:

Beginning Balance $ — $ — $ 11,354

Proceeds from sales and maturities of convertible debt securities — — ( 8,594 )

Transfer to other equity method investment upon conversion of convertible debt security — — ( 4,008 )

Total gains (losses) included in other comprehensive income (loss) — — ( 1,148 )

Total gains (losses) included in earnings (2)

Ending Balance $ — $ — $ —

Unrealized gains (losses) still held (1)

Redeemable preferred shares:

Preferred shares:

Beginning balance $ — $ — $ 10,340

6 unchanged sentences

Beginning balance $ 326 $ 1,298 $ 1,529

Issuance of contingent consideration in connection with acquisitions — — 1,589

Settlements of contingent consideration liabilities ( 393 ) ( 908 ) ( 312 )

Total losses (gains) included in earnings 6 39 56

Foreign currency translation ( 70 ) 42 ( 116 )

Foreign currency translation and total losses (gains) included in earnings 67 ( 64 ) 81

Ending balance $ — $ 326 $ 1,298

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.

(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-

During the year ended December 31, 2021, we adjusted the carrying value of an other equity investment, which resulted in an unrealized gain of $ 89.1 million, and sold shares in two other equity investments for a gain of $ 6.4 million.

For the year ended December 31, 2020, we recognized a $ 6.7 million impairment related to an other equity method investment.

For the year ended December 31, 2019, we adjusted the carrying value of an other equity investment, which resulted in an unrealized gain of $ 51.4 million.

See Note 6, Investments , for additional information.

We recognized $ 7.7 million in non-cash impairment charges related to right-of-use assets - operating leases and leasehold improvements during the year ended December 31, 2021, which is included in Restructuring and related charges on our consolidated statements of operations.

We recognized $ 109.5 million in non-cash impairment charges related to goodwill and $ 44.0 million in non-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 4, Property, Equipment and Software, Net, Note 5, Goodwill and Other Intangible Assets, Note 9, Leases and Note 14, Restructuring and Related Charges , for additional information.

We classified the fair value of the Atairos Notes and 2026 Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the respective note and our cost of debt.

The estimated fair value of the 2026 Notes, that were issued in March and April 2021, was $ 183.3 million as of December 31, 2021 and the Atairos Notes, that were repurchased in May 2021, was $ 263.3 million as of December 31, 2020, both of which were determined using a lattice model.

See Note 8, Financing Arrangements, for additional information.

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.

To determine the fair value of the investment, we considered the financial condition of the investee and applied a market approach.

We have classified the fair value measurement of that other equity investment as Level 3 because it involves significant unobservable inputs.

See Note 8, Investments , for additional information.

Estimated Fair Value of Financial Assets and Liabilities Not Measured at Fair Value

Our financial instruments not carried at fair value consist primarily of accounts receivable, restricted cash, accounts payable, accrued merchant and supplier payables and accrued expenses.

Our financial instruments not carried at fair value consist primarily of accounts receivable, restricted cash, short-term borrowings, accounts payable, accrued merchant and supplier payables and accrued expenses.

The carrying values of those assets and liabilities approximate their respective fair values as of December 31, 2021 and 2020 due to their short-term nature.

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Diluted net income (loss) per share is computed using the weighted-average number of common shares and the effect of potentially dilutive securities outstanding during the period.

Potentially dilutive securities include stock options, restricted stock units, performance share units, performance bonus awards, ESPP shares, warrants and convertible senior notes.

Potentially dilutive securities include stock options, restricted stock units, performance share units, ESPP shares, warrants, convertible senior notes and capped call transactions.

If dilutive, those potentially dilutive securities are reflected in diluted net income (loss) per share using the treasury stock method, except for the convertible senior notes, which are subject to the if-converted method.

GROUPON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the computation of basic and diluted net income (loss) per share of common stock for the years ended December 31, 2021, 2020 and 2019 (in thousands, except share amounts and per share amounts):

2 unchanged sentences

Basic and diluted net income (loss) per share:

Net income (loss) - continuing operations $ ( 286,562 ) $ ( 14,292 ) $ 1,988

Income (loss) - continuing operations $ 120,348 $ ( 286,562 ) $ ( 14,292 )

Net income (loss) attributable to noncontrolling interests 1,680 1,751 10,682

Net income (loss) attributable to common stockholders - continuing operations $ ( 288,313 ) $ ( 24,974 ) $ ( 11,079 )

Basic net income (loss) attributable to common stockholders - continuing operations 118,668 ( 288,313 ) ( 24,974 )

Net income (loss) attributable to common stockholders - discontinued operations — 382 2,597

Net income (loss) attributable to common stockholders $ ( 287,931 ) $ ( 22,377 ) $ ( 11,079 )

Weighted-average common shares outstanding 28,604,115 28,370,417 28,325,555

Basic and diluted net income (loss) per share:

Basic net income (loss) attributable to common stockholders $ 118,668 $ ( 287,931 ) $ ( 22,377 )

Diluted net income (loss) attributable to common stockholders - continuing operations 118,668 ( 288,313 ) ( 24,974 )

Net Income (loss) attributable to common stockholders - discontinued operations — 382 2,597

Diluted net income (loss) attributable to common stockholders 118,668 ( 287,931 ) ( 22,377 )

Interest expense from assumed conversion of convertible senior notes 4,643 — —

Net income (loss) attributable to common stockholders plus assumed conversions $ 123,311 $ ( 287,931 ) $ ( 22,377 )

Shares used in computation of basic net income (loss) per share 29,365,880 28,604,115 28,370,417

Weighted-average effect of diluted securities:

Restricted stock units 624,794 — —

Performance share units and other stock-based compensation awards 89,065 — —

Convertible senior notes due 2022 858,517 — —

Convertible senior notes due 2026 2,575,184 — —

Shares used in computation of diluted net income (loss) per share 33,513,440 28,604,115 28,370,417

Basic net income (loss) per share:

Continuing operations $ 4.04 $ ( 10.08 ) $ ( 0.88 )

Discontinued operations — 0.01 0.09

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

Basic net income (loss) per share $ 4.04 $ ( 10.07 ) $ ( 0.79 )

Diluted net income (loss) per share:

Continuing operations $ 3.68 $ ( 10.08 ) $ ( 0.88 )

Discontinued operations — 0.01 0.09

Diluted net income (loss) per share $ 3.68 $ ( 10.07 ) $ ( 0.79 )

GROUPON, INC.

4 unchanged sentences

Restricted stock units 500,763 1,887,322 1,652,002

Other stock-based compensation awards 199,629 125,562 102,054

Convertible senior notes 2,314,815 2,314,815 2,314,815

Performance share units and other stock-based compensation awards — 199,629 125,562

Convertible senior notes due 2022 (1)

— 2,314,815 2,314,815

Warrants 877,595 2,314,815 2,314,815

Capped call transactions 2,575,184 — —

Total 3,953,542 6,716,581 6,407,194

(1) We apply the if-converted method in computing the effect of our convertible senior notes on diluted net income (loss) per share, whereby the numerator of our diluted net income (loss) per share computations is adjusted for interest expense, net of tax, and the denominator is adjusted for the number of shares into which the convertible senior notes could be converted.

The effect is only included in the calculation of income (loss) per share for those instruments for which it would reduce income (loss) per share.

See Note 8, Financing Arrangements , for additional information.

We had outstanding Market-based Performance Share Units as of December 31, 2021 that were eligible to vest into shares of common stock subject to the achievement of specified performance or market conditions.

Contingently issuable shares are excluded from the computation of diluted earnings per share if, based on current period results, the shares would not be issuable if the end of the reporting period were the end of the contingency period.

Contingently-issuable shares are excluded from the computation of diluted net income (loss) per share if, based on current period results, the shares would not be issuable if the end of the reporting period were the end of the contingency period.

As of December 31, 2021, there were up to 57,668 shares of common stock issuable upon vesting of outstanding Market-based Performance Share Units that were excluded from the table above as the performance or market conditions were not satisfied as of the end of the period.

1 unchanged sentence

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.

Our measure of segment profitability is 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.

GROUPON, INC.

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Revenue is attributed to individual countries based on the location of the customer.

The following table summarizes gross profit by reportable segment and category for the years ended December 31, 2020, 2019 and 2018 (in thousands):

The following table summarizes cost of revenue by reportable segment and category for the years ended December 31, 2021, 2020 and 2019 (in thousands):

Year Ended December 31,

1 unchanged sentence

North America

Service gross profit:

Service cost of revenue:

Local $ 58,192 $ 53,143 $ 77,539

1 unchanged sentence

Travel 4,952 4,779 12,200

Total service gross profit 420,799 702,403 744,599

Product gross profit - Goods 54,832 105,342 146,085

Total North America gross profit $ 475,631 $ 807,745 $ 890,684

Total service cost of revenue 70,934 64,346 92,810

Product cost of revenue - Goods 458 278,647 458,352

Total North America cost of revenue $ 71,392 $ 342,993 $ 551,162

International

Service gross profit:

Service cost of revenue:

Local $ 8,962 $ 12,362 $ 17,945

1 unchanged sentence

Travel 1,138 1,327 2,775

Total service gross profit 143,558 309,492 340,811

Product gross profit - Goods 58,105 68,892 89,106

Total International gross profit $ 201,663 $ 378,384 $ 429,917

Total service cost of revenue 11,086 14,950 21,652

Product cost of revenue - Goods 147,514 381,631 459,972

Total International cost of revenue $ 158,600 $ 396,581 $ 481,624

GROUPON, INC.

4 unchanged sentences

North America

Gross profit $ 475,631 $ 807,745 $ 890,684

Revenue $ 607,055 $ 818,624 $ 1,358,907

Cost of revenue 71,392 342,993 551,162

Marketing 138,025 96,039 214,069

1 unchanged sentence

International

Gross profit 201,663 378,384 429,917

Revenue 360,053 598,244 860,008

Cost of revenue 158,600 396,581 481,624

Marketing 50,755 58,495 125,286

Contribution profit 150,698 143,168 253,098

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

Revenue 967,108 1,416,868 2,218,915

Cost of revenue 229,992 739,574 1,032,786

Marketing 188,780 154,534 339,355

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(1) North America contains assets from the United States of $ 951.8 million and $ 948.1 million as of December 31, 2021 and 2020.

International contains assets from Switzerland of $ 151.7 million and $ 175.2 million as of December 31, 2020 and 2019.

International contains assets from the United Kingdom of $ 126.0 million as of December 31, 2021 and from Switzerland of $ 151.7 million as of December 31, 2020.

There were no other individual countries that represented more than 10% of consolidated total assets as of December 31, 2021 and 2020.

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, 2021 and 2020 (in thousands):

5 unchanged sentences

(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)

There were no other individual countries located outside of the United States where tangible property and equipment, net is material as of December 31, 2021 and 2020.

The following table summarizes depreciation and amortization of property, equipment and software and intangible assets by reportable segment for the years ended December 31, 2021, 2020 and 2019 (in thousands):

14 unchanged sentences

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