Groupon Inc

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Company Information

Groupon, Inc. 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 intotwo segments: North America and International. See Note 13, Segment Information, for more information.

Unaudited Interim Financial Information

We have prepared the accompanying Condensed Consolidated Financial Statements pursuant to the rules and regulations of the SEC for interim financial reporting. These Condensed Consolidated Financial Statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair presentation of the Condensed Consolidated Balance Sheets, Statements of Operations and Comprehensive Income (Loss), Cash Flows and Stockholders' Equity (Deficit) for the periods presented. These Condensed Consolidated Financial Statements and notes should be read in conjunction with the audited Consolidated Financial Statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of Groupon, Inc. and its wholly-owned subsidiaries, majority-owned subsidiaries over which we exercise control and variable interest entities for which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation. Outside stockholders' interests in subsidiaries are shown on the Condensed Consolidated Financial Statements as Noncontrolling interests. Investments in entities in which we do not have a controlling financial interest are accounted for at fair value as available-for-sale securities or at cost adjusted for observable price changes and impairments, as appropriate.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed 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; leases; initial valuation and subsequent impairment testing of goodwill, other intangible assets and long-lived assets; investments; receivables; customer refunds and other reserves; contingent liabilities; and the useful lives of property, equipment and software and intangible assets. Actual results could differ materially from those estimates.

Reclassifications

Certain reclassifications have been made to the Condensed Consolidated Financial Statements of prior periods to conform to the current period presentation.

Adoption of New Accounting Standards

There were no new accounting standards adopted during the three and six months ended June 30, 2024.

Recently Issued Accounting Standards

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is assessing the effect this guidance may have on our disclosures.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU is effective for annual periods beginning after December 15, 2024. The Company is assessing the effect this guidance may have on our disclosures.

NOTE 2. GOODWILL AND LONG-LIVED ASSETS

Goodwill

As of June 30, 2024 and December 31, 2023, the balance of our goodwill was $178.7 million. There was no goodwill activity during the six months ended June 30, 2024. All goodwill is within our North America segment.

Long-Lived Assets

In March 2024, we entered into an agreement with a third party to sell the rights to certain intangible assets in exchange for cash consideration of $10.0 million, subject to license-back provisions that permit continued use of the assets in the ordinary course of our business. The sale was completed in April 2024 and resulted in a pre-tax gain of $5.0 million. The pre-tax gain is presented within Gain on sale of assets on the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024. The cash activity is presented within Proceeds from sale of assets, net in the investing section on the Condensed Consolidated Statements of Cash Flows and includes cash consideration received of $10.0 million, less $1.0 million in fees. The assets were within our North America segment.

The following table summarizes intangible assets as of June 30, 2024 and December 31, 2023 (in thousands):

(1) The change in the net carrying value is primarily due to the sale of certain intangible assets.

Amortization of intangible assets is computed using the straight-line method over their estimated useful lives, which range from 1 to 10 years. Amortization expense related to intangible assets was $0.6 million and $2.1 million for the three months ended June 30, 2024 and 2023 and $2.2 million and $4.2 million for the six months ended June 30, 2024 and 2023. As of June 30, 2024, estimated future amortization expense related to intangible assets is as follows (in thousands):

NOTE 3. INVESTMENTS

As of June 30, 2024 and December 31, 2023, our carrying value in other equity investments was $74.8 million, which relates to our non-controlling equity interest in SumUp, and our available-for-sale securities and fair value option investments had a carrying value ofzero. There were no changes in fair value of our investments for the three and six months ended June 30, 2024.

The following table summarizes our percentage ownership in our investments as of the dates noted below:

NOTE 4. SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS INFORMATION

The following table summarizes Prepaid expenses and other current assets as of June 30, 2024 and December 31, 2023 (in thousands):

(1) The decrease in Deferred cloud implementation costs, net relates to amortization.

(2) Primarily consists of cash collateral related to our letters of credit. See Note 5, Financing Arrangementsfor additional information.

The following table summarizes Other non-current assets as of June 30, 2024 and December 31, 2023 (in thousands):

The following table summarizes Accrued expenses and other current liabilities as of June 30, 2024 and December 31, 2023 (in thousands):

(1) See Note 6, Commitments and Contingencies, for additional information.

The following table summarizes Other non-current liabilities as of June 30, 2024 and December 31, 2023 (in thousands):

The following table summarizes Other income (expense), net for the three and six months ended June 30, 2024 and 2023 (in thousands):

NOTE 5. FINANCING ARRANGEMENTS

Convertible Senior Notes due 2026

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, with an annual effective interest rate of 1.83%. The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion.

The carrying amount of the 2026 Notes consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):

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 June 30, 2024 and December 31, 2023 was $199.5 millionand $141.9 million and was determined using a lattice model.

During the three and six months ended June 30, 2024 and 2023, we recognized interest costs on the 2026 Notes as follows (in thousands):

Capped Call Transactions

In connection with the 2026 Notes, we entered into privately-negotiated capped call transactions. 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.

Revolving Credit Agreement

In February 2024, we prepaid $43.1 million to terminate all commitments to access further credit under the Credit Agreement using a portion of the $80.0 million in proceeds received from the Rights Offering. The Payoff Amount included $42.8 million in principal, $0.1 million in interest and $0.2 million in fees. The terms of the Rights Offering permit the Company to use the proceeds for general corporate purposes, including the repayment of debt. We were not subject to any early termination penalties under the Credit Agreement. The payment of the Payoff Amount terminated our obligations under the Credit Agreement, except for ordinary and customary survival terms. In addition, we retained access to letters of credit, originally available under the Credit Agreement, pursuant to our pre-existing Cash Collateral Agreement.

Amounts committed to letters of credit and outstanding borrowings under the Cash Collateral Agreement and Credit Agreement, respectively, as of June 30, 2024 and December 31, 2023 were as follows (in thousands):

(1) Pursuant to the Cash Collateral Agreement, cash collateral is required for all letters of credit and treated as restricted cash on the Condensed Consolidated Balance Sheets. See Note 4, Supplemental Condensed Consolidated Balance Sheets and Statements of Operations Information, for additional information.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Our contractual obligations and commitments as of June 30, 2024 and through the date of this report, did not materially change from the amounts set forth in our 2023 Annual Report on Form 10-K.

Legal Matters and Other Contingencies

From time to time, we are party to various legal proceedings incident to the operation of our business. For example, we currently are involved in proceedings brought by merchants, employment and related matters, intellectual property infringement suits, customer lawsuits, stockholder claims relating to U.S. securities law, consumer class actions and suits alleging, among other things, violations of state consumer protection or privacy laws.

We currently have an appeal lodged in the Portuguese courts relating to a Portugal VAT assessment for the periods from 2013 to 2015 of approximately $4.1 million, inclusive of penalties and interest through June 30, 2024. After negative rulings at lower level courts in November 2023 and May 2024, we lodged a final appeal to the highest-level court. It is uncertain whether the court will agree to hear the appeal and if the Court chooses to hear the appeal, it will be confined to considering issues of law. If the court declines to hear the appeal, the assessment will become final and payable. Given the uncertainty of whether our final appeal for the assessment will be heard, we concluded that a loss was probable and recorded a contingent liability of $4.1 million in our Condensed Consolidated Balance Sheets as of June 30, 2024 and recognized expenses in our Condensed Consolidated Statements of Operations for $3.3 million of taxes and penalties within Selling, general and administrative and $0.8 million of interest expense within Other income (expense), net. We currently have a bank guarantee of $3.7 million in place relating to the assessment that is classified as restricted cash in our Condensed Consolidated Balance Sheets as of June 30, 2024.

A Groupon subsidiary in Italy is presently litigating a tax dispute with the Italian tax authorities relating to a $120.4 million assessment, inclusive of taxes, penalties and interest through June 30, 2024. The subsidiary has lodged a second-level appeal and also has the ability to challenge the assessment in an international Mutual Agreement Proceeding if it does not prevail in the Italian courts. A hearing on the second-level appeal was originally scheduled for July 9, 2024 and has been rescheduled by the court until September 24, 2024. The Company continues to believe that the assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit. The subsidiary continues to vigorously defend itself in this matter and believes it will prevail on the merits of the case. Refer to Note 10, Income Taxes for additional information.

In 2015 we lodged an appeal in the Portuguese courts relating to a Portugal VAT assessment for the periods from 2011 to 2012 of up to $4.4 million, inclusive of penalties and interest through June 30, 2024. The case is currently pending at the lowest level court awaiting a final decision. If there is a negative outcome, at this lowest level, Groupon could still pursue two rounds of appeals in which it can still assert factual and legal challenges to the assessment. Groupon also maintains the opportunity to petition subsequent courts to refer the matter to the European Court of Justice. We have not recorded a contingent liability for this amount as, for the reasons stated above, we concluded it is not probable a loss has been incurred as of June 30, 2024. This case is separate and not dependent on the outcome of the Portugal matter discussed above, wherein the ability to appeal further is not certain and factual issues can no longer be challenged. We currently have a bank guarantee of $4.0 million in place relating to the assessment that is classified as restricted cash in our Condensed Consolidated Balance Sheets as of June 30, 2024.

In June 2023, Groupon was granted final approval of a settlement that resolved four shareholder derivative lawsuits in relation to a previously settled lawsuit that alleged 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. Under the settlement, Groupon agreed to undertake certain corporate reforms. The Court awarded attorneys' fees in the amount of $950,000 to Plaintiffs' counsel. That amount was covered under Groupon's insurance policies and was paid directly by Groupon's insurance carriers in July 2023.

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. We are subject to intellectual property disputes, including patent infringement claims, and expect that we will continue to be subject to intellectual property infringement claims as our services expand in scope and complexity. In the past and/or at present, we have litigated patent infringement and other intellectual property-related claims, including pending litigation or trademark disputes relating to, for example, our Goods category, some of which involved or could have involved potentially substantial claims for damages or injunctive relief. We may also become more vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act are interpreted by the courts, and we become subject to laws in jurisdictions where the underlying laws with respect to the potential liability of online intermediaries are either unclear or less favorable. We believe that additional lawsuits alleging that we have violated patent, copyright or trademark laws may be filed against us. Intellectual property claims, whether meritorious or not, are time consuming and often costly to resolve, could require expensive changes in our methods of doing business or the goods we sell, or could require us to enter into costly royalty or licensing agreements.

We also are subject to consumer claims or lawsuits relating to alleged violations of consumer protection or privacy rights and statutes, some of which could involve potentially substantial claims for damages, including statutory or punitive damages. Consumer and privacy-related claims or lawsuits, whether meritorious or not, could be time consuming, result in costly litigation, damage awards, fines and penalties, injunctive relief or increased costs of doing business through adverse judgment or settlement, or require us to change our business practices, sometimes in expensive ways.

We are also subject to, or in the future may become subject to, a variety of regulatory inquiries, audits, and investigations across the jurisdictions where we conduct our business, including, for example, inquiries related to consumer protection, employment matters and/or hiring practices, marketing practices, tax, unclaimed property and privacy rules and regulations. Any regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, damage awards, fines and penalties, injunctive relief or increased costs of doing business through adverse judgment or settlement, require us to change our business practices in expensive ways, require significant amounts of management time, result in the diversion of significant operational resources, materially damage our brand or reputation, or otherwise harm our business.

We establish an accrued liability for loss contingencies related to legal, regulatory and indirect tax matters when the loss is both probable and reasonably estimable. Those accruals represent management's best estimate of probable losses and, in such cases, there may be an exposure to loss in excess of the amounts accrued. For certain of the matters described above, there are inherent and significant uncertainties based on, among other factors, the stage of the proceedings, developments in the applicable facts of law, or the lack of a specific damage claim. However, we believe that the amount of reasonably possible losses in excess of the amounts accrued for those matters would not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows. Our accrued liabilities for loss contingencies related to legal, regulatory and indirect tax matters may change in the future as a result of new developments, including, but not limited to, the occurrence of new legal matters, changes in the law or regulatory environment, adverse or favorable rulings, newly discovered facts relevant to the matter, or changes in the strategy for the matter. Regardless of the outcome, litigation and other regulatory matters can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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. We estimated the indemnification liabilities using a probability-weighted expected cash flow approach. Our remaining indemnification liabilities were $2.8 million as of June 30, 2024. We estimate that the total amount of obligations that are reasonably possible to arise under the indemnifications in excess of amounts accrued as of June 30, 2024 were approximately $11.7 million.

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. We have agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or other claims made against those parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. We are also subject to increased exposure to various claims as a result of our divestitures and acquisitions. We may also become more vulnerable to claims as we expand the range and scope of our services and are subject to laws in jurisdictions where the underlying laws with respect to potential liability are either unclear or less favorable. In addition, we have entered into indemnification agreements with our officers, directors and underwriters, and our bylaws contain similar indemnification obligations that cover officers, directors, employees and other agents.

Except as noted above, it is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, any payments that we have made under these agreements have not had a material impact on our operating results, financial position or cash flows.

NOTE 7. STOCKHOLDERS' EQUITY (DEFICIT) AND COMPENSATION ARRANGEMENTS

Groupon, Inc. Incentive Plan

In August 2011, we established the 2011 Plan under which options, RSUs and PSUs for up to 13,775,000 shares of Common Stock are authorized for future issuance to employees, consultants and directors. The 2011 Plan is administered by the Compensation Committee. In June 2024, at the Company's annual meeting of stockholders, the Company's stockholders approved an amendment to the 2011 Plan to increase the number of authorized shares by 7,000,000. Accordingly, a total of 20,775,000 shares of Common Stock have been authorized for issuance under the 2011 Plan. As of June 30, 2024,6,039,229 shares of Common Stock were available for future issuance under the 2011 Plan.

Restricted Stock Units

The RSUs generally have vesting periods betweenone andfour years and are amortized on a straight-line basis over their requisite service period.

The table below summarizes RSU activity for the six months ended June 30, 2024:

As of June 30, 2024, $7.3 million of unrecognized compensation costs related to unvested RSUs are expected to be recognized over a remaining weighted-average period of 1.5 years.

Stock Options

On March 30, 2023, we issued 3,500,000 units of stock options with a per share value of $0.95, a strike price of $6.00 and vesting overtwo years. The exercise price of stock options granted is equal to the fair market value of the underlying stock on the date of grant. The contractual term for these stock options expires three years from the grant date. The fair value of stock options on the grant date is amortized on a straight-line basis over the requisite service period.

The fair value of stock options granted is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Expected volatility is based on Groupon's historical volatility over the estimated expected life of the stock options. The expected term represents the period of time the stock options are expected to be outstanding. The risk-free interest rate is based on yields on U.S. Treasury STRIPS with maturity similar to the estimated expected life of the stock options. The weighted-average assumptions for stock options granted are outlined in the following table:

The table below summarizes stock option activity for the six months ended June 30, 2024:

(1) Consists of 2,187,500 outstanding (unvested) stock options and 875,000 exercisable stock options as of December 31, 2023, as presented within our Annual Report on Form 10-K.

As of June 30, 2024, there was $1.2 million of total unrecognized compensation costs related to unvested stock options granted under the 2011 Plan. That cost is expected to be recognized over a weighted-average period of 0.75 years. The total fair value of shares vested during the six months ended June 30, 2024 was $0.8 million.

These stock options were granted to our Chief Executive Officer, who is based in the Czech Republic. Taxes on stock options in the Czech Republic are payable upon the sale of the underlying shares. The Company's tax liability is determined by multiplying the applicable tax rate by the difference between the value of the shares underlying the options on the date of exercise and the aggregate exercise price of the options. These taxes will be recognized in the Condensed Consolidated Statement of Operations upon any subsequent sale of the shares acquired upon exercise of the options.

Performance Share Units

We have previously granted PSUs that vest in shares of our Common Stock upon the achievement of financial and operational targets specified in the respective award agreement. Based on our financial and operational results for the year ended December 31, 2023,422,368 shares became issuable upon vesting of PSUs following the Compensation Committee's certification in April 2024. In May 2024, we also granted the 2024 Executive PSUs.

The 2024 Executive PSUs may only be earned if certain stock price hurdles are met and the recipient satisfies certain service conditions. The achievement of the stock price hurdles is measured during a period that begins nine months after the award date of May 1, 2024 and ends on May 1, 2027. The 2024 Executive PSUs have four stock price hurdles: $14.86, $20.14, $31.01, and $68.82. The shares awarded under the 2024 Executive PSU award are divided equally between four tranches corresponding to achievement of each stock price hurdle. Once the stock price hurdle is achieved, a service condition must also be met before the shares will vest. Specifically, the service condition for: (i)33% of the award will be met after the first anniversary of the award date; (ii) an additional 33% of the award will be met after the second anniversary of the award date; and (ii) the final 34% of the award will be met after the third anniversary of the award date. We determined these awards are subject to a market condition, and therefore used a Monte Carlo simulation to calculate the grant date fair value of the awards and the related derived service period. The three year service condition period exceeds the derived service period and therefore we will recognize the expense over the three year requisite service period. The key inputs used in the Monte Carlo simulation were the risk-free rate of 4.46%, dividend yield of 0.0% and our stock price volatility of 95.73%.

Both our PSUs and the 2024 Executive PSUs are subject to continued service through the period dictated by the award and certification by the Compensation Committee that the specified performance conditions have been achieved.

The table below summarizes PSU activity for the six months ended June 30, 2024:

As of June 30, 2024, $43.2 million of unrecognized compensation costs related to unvested PSUs are expected to be recognized over a remaining weighted-average period of 2.31 years.

Rights Offering

In November 2023, the Board approved an $80.0 million fully backstopped Rights Offering to our stockholders of record of our Common Stock, as of the close of business on November 20, 2023.

The Rights Offering was made through the distribution of non-transferable subscription rights to purchase shares of Common Stock at a subscription price of $11.30 per share and otherwise on such terms and subject to such conditions as may be required to comply with any applicable Nasdaq Global Market stock exchange rules and regulations. The Expiration Date for the subscription period for the Rights Offering ended on January 17, 2024.

The Rights Offering was fully backstopped by Pale Fire Capital SICAV a.s., the Backstop Party, an entity affiliated with (i) Dusan Senkypl, the Company’s Chief Executive Officer and a member of the Board, and (ii) Jan Barta, a member of the Board. The Backstop Party had a binding commitment to (i) fully exercise its pro rata subscription right prior to the Expiration Date of the Rights Offering and (ii) fully purchase any and all unsubscribed shares in the Rights Offering following the Expiration Date at the same price and on the same terms and conditions as other participants in the Rights Offering.

On January 22, 2024, we announced the closing of our $80.0 million fully backstopped Rights Offering for shares of our Common Stock, par value $0.0001 per share.

Pursuant to the terms of the Rights Offering,7,079,646 shares of Common Stock were purchased at $11.30 per share, generating $80.0 million in gross proceeds, less issuance costs incurred. As detailed below, the Rights Offering was oversubscribed, and the subscriptions, inclusive of the exercise of all over-subscription privileges, well exceeded $80.0 million, the maximum aggregate offering size of the Rights Offering.

Through the exercise of both basic subscription rights and over-subscription privileges, the Backstop Party subscribed for approximately 7.1 million shares and other stockholders subscribed for approximately 9.7 million shares. The Company is issuing 4,574,113 shares of Common Stock via the exercise of the basic subscription rights and 2,505,533 shares of Common Stock via the exercise of over-subscription privileges. The Backstop Party purchased approximately 3.1 million shares of Common Stock in connection with the Rights Offering.

NOTE 8. REVENUE RECOGNITION

Refer to Note 13, Segment Information, for revenue summarized by reportable segment and category for the three and six months ended June 30, 2024 and 2023.

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 and, to a lesser extent, for customer relationship purposes. The following table summarizes the activity in the liability for customer credits for the six months ended June 30, 2024 (in thousands):

(1)Customer credits can be redeemed through our online marketplaces for goods or services provided by a third-party merchant and revenue is recognized on a net basis as the difference between the carrying amount of the customer credit liability derecognized and the amount due to the merchant for the related transaction. Customer credits are typically used withinone year of issuance.

Costs of Obtaining Contracts

Incremental costs to obtain contracts with third-party merchants, such as sales commissions, are deferred and recognized on a straight-line basis over the expected period of the merchant arrangement, generally from 12 to 18 months. Deferred contract acquisition costs are presented in Prepaid expenses and other current assets and Other non-current assets on the Condensed Consolidated Balance Sheets. As of June 30, 2024 and December 31, 2023, deferred contract acquisition costs were $3.6 million and $3.9 million.

The amortization of deferred contract acquisition costs is classified within Selling, general and administrative expense in the Condensed Consolidated Statements of Operations. We amortized $1.5 million and $2.1 million of deferred contract acquisition costs for the three months ended June 30, 2024 and 2023 and $3.0 million and $4.4 million for the six months ended June 30, 2024 and 2023.

Allowance for Expected Credit Losses on Accounts Receivable

Accounts receivable primarily represents the net cash due from credit card and other payment processors and from merchants and performance marketing networks for commissions earned on consumer purchases. The carrying amount of receivables is reduced by an allowance for expected credit losses that reflects management's best estimate of amounts that will not be collected. We establish an allowance for expected credit losses on accounts receivable based on identifying the following customer risk characteristics: size, type of customer and payment terms offered in the normal course of business. Receivables with similar risk characteristics are grouped into pools. For each pool, we consider the historical credit loss experience, current economic conditions, bankruptcy filings, published or estimated credit default rates, age of the receivable and any recoveries in assessing the lifetime expected credit losses.

The following table summarizes the activity in the allowance for expected credit losses on accounts receivable for the six months ended June 30, 2024 (in thousands):

Variable Consideration for Unredeemed Vouchers

For merchant agreements with redemption payment terms, the merchant is not paid its share of the sale price for a voucher sold through one of our online marketplaces until the customer redeems the related voucher. If the customer does not redeem a voucher with such merchant payment terms, we retain all of the gross billings for that voucher, rather than retaining only our net commission. We estimate the variable consideration from vouchers that will not ultimately be redeemed using our historical voucher redemption experience and recognize that amount as revenue at the time of sale. We apply a constraint to ensure it is probable that a significant reversal of revenue will not occur in future periods. We recognized variable consideration from unredeemed vouchers that were sold in a prior period of $7.5 million and $4.7 million for the three months ended June 30, 2024 and 2023, and $10.1 million and $4.4 million for the six months ended June 30, 2024 and 2023. When actual redemptions differ from our estimates, the effects could be material to the Condensed Consolidated Financial Statements.

NOTE 9. RESTRUCTURING AND RELATED CHARGES

In August 2022 and April 2020, we initiated Board-approved restructuring plans. Costs incurred related to the restructuring plans are classified as Restructuring and related charges (credits) on the Condensed Consolidated Statements of Operations. The restructuring activities are summarized by plan in the sections below.

2022 Restructuring Plan

In August 2022, we initiated the 2022 Cost Savings Plan, a multi-phase cost savings plan designed to reduce our expense structure to align with our go-forward business and financial objectives. The 2022 Cost Savings Plan included the 2022 Restructuring Plan, approved by our Board in August 2022. The 2022 Restructuring Plan, including the first phase initiated August 2022, second phase initiated January 2023 and the third phase initiated July 2023 is expected to include an overall reduction of approximately 1,150 positions globally through natural attrition or involuntary termination. The majority of these reductions were completed as of March 31, 2023 and the remainder expected to occur by the end of 2024. We have incurred total pre-tax charges of $21.3 million since the inception of the 2022 Restructuring Plan. A majority of the pre-tax charges have been paid in cash and relate to employee severance and compensation benefits, with an immaterial amount of charges related to other exit costs.

The following tables summarize activity by segment related to the 2022 Restructuring Plan for the three and six months ended June 30, 2024 (in thousands):

(1)The employee severance and benefits costs for the three months ended June 30, 2024 are related to the termination of approximately 7 employees.

(1)The employee severance and benefits costs for the three months ended June 30, 2023 are related to the termination of approxim ately 39 employees.

(1)The employee severance and benefits costs for the six months ended June 30, 2024 are related to the termination of approximately 12 employees.

(1)The employee severance and benefits costs for the six months ended June 30, 2023 are related to the termination of approximately 371 employees.

The following table summarizes restructuring liability activity for the 2022 Restructuring Plan (in thousands):

(1)Primarily relates to the release of our estimated accrual for certain severance benefits upon expiration of the eligible payout period.

2020 Restructuring Plan

In April 2020, the Board approved the 2020 Restructuring Plan. Our actions under this plan were substantially completed in 2021 and our current and future charges or credits will be from changes in estimates. For additional plan details, see Part II, Item 8, Note 13. Restructuring and Related Charges in our Annual Report on Form 10-K for the year ended December 31, 2023.

The following tables summarize activity by segment related to the 2020 Restructuring Plan for the three and six months ended June 30, 2024 and 2023 (in thousands):

(1) The credit recorded during the three months ended June 30, 2024 primarily relates to an over contribution of estimated real estate taxes in 2023 for the terminated lease at 600 West Chicago.

(1) The credit recorded during the three months ended June 30, 2023 primarily relates to the release of our estimated accrual for certain severance benefits upon expiration of the eligible payout period.

(1) The credit recorded during the six months ended June 30, 2024 primarily relates to an over contribution of estimated real estate taxes in 2023 for the terminated lease at 600 West Chicago.

(1) The credit recorded during the six months ended June 30, 2023 primarily relates to the release of our estimated accrual for certain severance benefits upon expiration of the eligible payout period.

As part of our 2020 Restructuring Plan, we terminated, vacated or modified several of our leases. In January 2023, we exercised our option to early terminate our lease at 600 West Chicago that expired in January 2024, which required us to pay a fee of $9.6 million with our early termination notice. As of June 30, 2024, all of our leases that were part of the 2020 Restructuring Plan have expired or have been terminated. For the three and six months ended June 30, 2024, our restructuring activity related to those leases had immaterial activity. 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 2020 Restructuring Plan are presented within Restructuring and related charges (credits) in the Condensed Consolidated Statements of Operations. As of June 30, 2023, the current and non-current liabilities associated with these leases were presented within Accrued expenses and other current liabilities and Operating lease obligations in the Condensed Consolidated Balance Sheets.

The following table summarizes restructuring liability activity for the 2020 Restructuring Plan (in thousands):

(1)Substantially all of the cash payments for the 2020 Restructuring Plan costs have been disbursed.

NOTE 10. INCOME TAXES

Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items.

Provision (benefit) for income taxes and Income (loss) before provision (benefit) for income taxes for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

Our U.S. Federal income tax rate is 21%. The primary factor impacting the effective tax rate for the three and six months ended June 30, 2024 and 2023 was the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. For the three and six months ended June 30, 2024 and 2023, we continue to maintain a full valuation allowance against all U.S. federal and state deferred tax assets. We expect that our consolidated effective tax rate in future periods will continue to differ significantly from the U.S. federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses.

We are currently under audit by several foreign jurisdictions. It is likely that the examination phase of some of those audits will conclude in the next 12 months. There are many factors, including factors outside of our control, which influence the progress and completion of those audits. We are subject to claims for tax assessments by foreign jurisdictions, including a proposed assess ment for$120.4 million, inclusive of estimated incremental interest from the original Assessment. The subsidiary subject to the Assessment is Groupon S.r.l., one of the Company's Italian subsidiaries with operations relating specifically to the local voucher business in Italy. In December 2023, Groupon S.r.l. received an unfavorable ruling at the lowest court level, but lodged a second-level appeal, based on what it believes to be meritorious defenses to the Assessment. Additionally, Groupon S.r.l. requested a suspension of provisional payment demands of approximately $81.9 million. On April 9, 2024,

Groupon S.r.l.'s payment suspension request was denied with an expedited hearing date of July 9, 2024, set for the second-level appeal. The hearing originally scheduled for July 9, 2024 has been rescheduled by the court until September 24, 2024. After the suspension denial, Groupon S.r.l. is required to post a bond of approximately $30.0 million, due immediately, and unless the appeal has been resolved in Groupon S.r.l's favor by October 22, 2024, an additional $51.9 million will be required to be posted on or before that date. As a result of the immediate payment demands, a lien was placed on Groupon S.r.l.'s bank account. In May 2024 Groupon S.r.l. entered into an installment plan for the approximately $30.0 million currently due and the bank account lien was removed. The related cash is no longer classified as restricted cash in our Condensed Consolidated Balance Sheets as of June 30, 2024. We believe the denial of the suspension request has no impact on the merits of Groupon S.r.l.'s appeal of the Assessment, therefore, the Company continues to believe that the Assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit. Groupon S.r.l. continues to vigorously defend itself in this matter and believes it will prevail on the merits of the case. Additionally, unrelated to this matter, in July 2024, Groupon S.r.l. received final assessments of approximately $31.5 million related to a 2017 distribution made to its parent entity. We believe this assessment is also without merit and Groupon S.r.l. intends to vigorously defend against such assessment. No liability has been recorded for either tax assessment matter. In addition to any potential increases in our liabilities for uncertain tax positions from the ultimate resolution of these assessments, we believe it is reasonably possible that reductions of up to$5.5 million in unrecognized tax benefits may occur within the 12 months following June 30, 2024 upon closing of income tax audits or the expiration of applicable statutes of limitations.

In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations or remit such earnings in a tax-efficient manner. Additionally, an actual repatriation from our non-U.S. subsidiaries could be subject to foreign and U.S. state income taxes. Aside from limited exceptions for which the related deferred tax liabilities recognized as of June 30, 2024 and December 31, 2023 are immaterial, we do not intend to distribute earnings of foreign subsidiaries for which we have an excess of the financial reporting basis over the tax basis of our investments and therefore have not recorded any deferred taxes related to such amounts. The actual tax cost resulting from a distribution would depend on income tax laws and circumstances at the time of distribution. 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.

NOTE 11. FAIR VALUE MEASUREMENTS

Fair value is defined under GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability.

In determining fair value, we use valuation approaches within the fair value measurement framework. We have fair value option investments and available-for-sale securities that we measure using the income approach. 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.

There was no material activity in the fair value of recurring Level 3 fair value measurements for the three and six months ended June 30, 2024 and 2023.

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 modified due to an observable price change in an orderly transaction.

We did not record any significant nonrecurring fair value measurements for the three and six months ended June 30, 2024 and 2023.

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, 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 June 30, 2024 and December 31, 2023 due to their short-term nature.

NOTE 12. INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. 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, RSUs, PSUs, ESPP shares, 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.

The following table sets forth the computation of basic and diluted net income (loss) per share of Common Stock for the three and six months ended June 30, 2024 and 2023 (in thousands, except share amounts and per share amounts):

The following weighted-average potentially dilutive instruments are not included in the diluted net income (loss) per share calculations above because they would have had an antidilutive effect on the net income (loss) per share:

(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 5, Financing Arrangements, for additional information.

As of June 30, 2024 there were up to 3,537,145 shares of Common Stock issuable upon vesting of outstanding 2024 Executive PSUs that were excluded from the table above as the shares are not eligible to vest until the beginning of the measurement period, which isnine months after the award date of May 1, 2024.

NOTE 13. SEGMENT INFORMATION

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. Our operations are organized intotwo 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.

The following table summarizes revenue by reportable segment and category for the three and six months ended June 30, 2024 and 2023 (in thousands):

(1)North America includes revenue from the United States of $97.0 million and $94.4 million for the three months ended June 30, 2024 and 2023 and $189.8 million and $182.1 million for the six months ended June 30, 2024 and 2023. There were no other individual countries that represented more than 10% of consolidated total revenue for the three and six months ended June 30, 2024 and 2023. Revenue is attributed to individual countries based on the location of the customer.

The following table summarizes cost of revenue by reportable segment and category for the three and six months ended June 30, 2024 and 2023 (in thousands):

The following table summarizes contribution profit by reportable segment for the three and six months ended June 30, 2024 and 2023 (in thousands):

The following table summarizes total assets by reportable segment as of June 30, 2024 and December 31, 2023 (in thousands):

(1)North America contains assets from the United States of $463.1 million and $460.2 million as of June 30, 2024 and December 31, 2023. There were no other individual countries that represented more than 10% of consolidated total assets as of June 30, 2024 and December 31, 2023.

NOTE 14. SUBSEQUENT EVENTS

Italy Restructuring

As previously disclosed on Form 8-K filed with the SEC on April 15, 2024, in connection with a local tax assessment in Italy, which is further described in Note 10, Income Taxes, the Company has been evaluating its options regarding operations in Italy. In April 2024, Groupon S.r.l. paused the sale of local vouchers in Italy.

In July 2024, Groupon S.r.l.'s Board approved the exit of the local business in Italy and the related restructuring actions associated with the exit. We expect to incur total pre-tax charges of up to $7.0 million in connection with these restructuring actions. The restructuring actions are expected to include an overall reduction of approximately 33 positions, with the majority of these reductions and payments expected to occur by the end of 2024. Additionally, as a result of these actions, it is possible that a valuation allowance against Groupon S.r.l's deferred tax assets may be needed in the future.