Groupon, Inc.: Form 10-Q for the period ended Mar 31, 2025

The following discussion and analysis of our financial condition and results of operations should be read together with our Condensed Consolidated Financial Statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under Part II, Item 1A, Risk Factors, and elsewhere in this Quarterly Report. See Part I*, Forward-Looking Statements,* for additional information.

Overview

Groupon is a global scaled two-sided marketplace that connects consumers to merchants. Consumers access our marketplace through our mobile applications and our websites. We operate in two segments, North America and International, and operate in three categories, Local, Goods and Travel. See Item 1, Note 13, Segment Information, for additional information.

Our strategy is to be the trusted marketplace where customers go to buy local services and experiences. We plan to grow our revenue by building long-term relationships with local merchants to strengthen our online selection and by enhancing the customer reach through experience curation and improved convenience in order to drive customer demand and purchase frequency.

We generate service revenue from Local, Goods and Travel categories. Revenue primarily represents the net commissions earned from selling goods or services on behalf of third-party merchants. Revenue is reported on a net basis as the purchase price collected from the customer less the portion of the purchase price that is payable to the third-party merchant. We also earn commissions when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications.

We are investing significant resources in making our platform more efficient, stable and agile. By improving our technology, our customer base can enjoy a modernized experience along with seamless execution of new product innovation, improved customer experience and customer satisfaction. Our platform migrations are strategic investments in our ability to innovate faster, serve merchants better, and create more engaging experiences for our customers.

How We Measure Our Business

We use several operating and financial metrics to assess the progress of our business and make strategic decisions. Certain of the financial metrics are reported in accordance with GAAP and certain of those metrics are considered non-GAAP financial measures. As our business evolves, we may make changes to the key financial and operating metrics that we use to measure our business. For further information and reconciliations to the most applicable financial measures under GAAP, refer to our discussion under Non-GAAP Financial Measures in the Results of Operations section.

Operating Metrics

• Gross billings is the total dollar value of customer purchases of goods and services. Gross billings is presented net of customer refunds, order discounts and sales and related taxes. The substantial majority of our revenue transactions are comprised of sales of vouchers and similar transactions in which we collect the transaction price from the customer and remit a portion of the transaction price to the third-party merchant who will provide the related goods or services. For these transactions, gross billings differs from Revenue reported in our Condensed Consolidated Statements of Operations, which is presented net of the merchant's share of the transaction price. Gross billings is an indicator of our growth and business performance as it measures the dollar volume of transactions generated through our marketplaces. Tracking gross billings also allows us to monitor the percentage of gross billings that we are able to retain after payments to merchants. However, we are focused on achieving long-term gross profit and Adjusted EBITDA growth.
• Units are the number of purchases during the reporting period, before refunds and cancellations, made either through one of our online marketplaces, a third-party marketplace, or directly with a merchant for which we earn a commission. We do not include purchases with retailers using digital coupons accessed through our websites or mobile applications in our units metric. We consider units to be an important indicator of the total volume of business conducted through our marketplaces. We report units on a gross basis prior to the consideration of customer refunds and therefore units are not always a good proxy for gross billings.
• Active customers are unique user accounts that have made a purchase during the TTM either through one of our online marketplaces or directly with a merchant for which we earned a commission. We consider this metric to be an important indicator of our business performance as it helps us to understand how the number of customers actively purchasing our offerings is trending. Some customers could establish and make purchases from more than one account, so it is possible that our active customer metric may count certain customers more than once in a given period. We do not include consumers who solely make purchases with retailers using digital coupons accessed through our websites or mobile applications in our active customer metric, nor do we include consumers who solely make purchases of our inventory through third-party marketplaces with which we partner.

Our gross billings and units for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Our active customers for the trailing twelve months ended March 31, 2025 and 2024 were as follows (in thousands):

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Financial Metrics

• Revenue is earned through transactions which we generate commissions by selling goods or services on behalf of third-party merchants. Revenue from those transactions is reported on a net basis as the purchase price collected from the customer for the offering less an agreed upon portion of the purchase price paid to the third-party merchant. Revenue also includes commissions we earn when customers make purchases with retailers using digital coupons accessed through our digital properties.
• Gross profit reflects the net margin we earn after deducting our Cost of revenue from our Revenue.
• Contribution Profit measures the amount of marketing investment needed to generate revenue and is defined as net revenues less cost of sales and marketing expense.
• Adjusted EBITDA is a non-GAAP financial measure that we define as Net income (loss) from continuing operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, and other special charges and credits, including items that are unusual in nature or infrequently occurring. For further information and a reconciliation to Net income (loss) from continuing operations, refer to our discussion under Non-GAAP Financial Measures in the Results of Operations section.
• Free cash flow is a non-GAAP financial measure that comprises Net cash provided by (used in) operating activities from continuing operations from operations less purchases of property and equipment and capitalized software. For further information and a reconciliation to Net cash provided by (used in) operating activities from continuing operations, refer to our discussion in the Liquidity and Capital Resources section.

The following table presents the above financial metrics for the three months ended March 31, 2025 and 2024 (in thousands):

Operating Expenses

• Marketing expense consists primarily of online marketing costs, such as search engine marketing, advertising on social networking sites and affiliate programs, and offline marketing costs, such as television. Additionally, compensation expense for marketing employees is classified within Marketing expense. We record these costs within Marketing on the Condensed Consolidated Statements of Operations when incurred. From time to time, we have offerings from well-known national merchants for customer acquisition and activation purposes, for which the amount we owe the merchant for each voucher sold exceeds the transaction price paid by the customer. Our gross billings from those transactions generate no revenue and our net cost (i.e., the excess of the amount owed to the merchant over the amount paid by the customer) is classified as marketing expense. We evaluate marketing expense as a percentage of gross profit because it gives us an indication of how well our marketing spend is driving gross profit performance.
• SG&A expenses include selling expenses such as sales commissions and other compensation expenses for sales representatives, as well as costs associated with supporting the sales function such as technology, telecommunications and travel. General and administrative expenses include compensation expense for employees involved in customer service, operations, technology and product development, as well as general corporate functions, such as finance, legal and human resources. Additional costs in general and administrative include depreciation and amortization, rent, professional fees, litigation costs, travel and entertainment, recruiting, maintenance, certain technology costs and other general corporate costs. We evaluate SG&A expense as a percentage of gross profit because it gives us an indication of our operating efficiency.
• Restructuring and related charges represent severance and benefit costs for workforce reductions, impairments and other facilities-related costs and professional advisory fees. See Item 1, Note 9, Restructuring and Related Charges, for additional information about our restructuring plans.

Factors Affecting Our Performance

Attracting and retaining local merchants. As we focus on our local experiences marketplace, we depend on our ability to attract and retain merchants who are willing to offer their experiences on our platform. Merchants can withdraw their offerings from our marketplace at any time, and their willingness to continue offering services through our marketplace depends on the effectiveness of our marketplace offering. We are focused on improving our marketplace offering and merchant value proposition by exploring opportunities to better balance the needs of merchant partners, customers and Groupon.

Acquiring and retaining customers. To acquire and retain customers to drive higher volumes on our platform from new and existing customers, we are focused on strengthening our product offering, improving the attractiveness of our offerings, and enhancing the performance of our marketing campaigns.

Impact of macroeconomic conditions. We have been, and may continue to be, impacted by adverse consequences of the macroeconomic environment, including but not limited to, inflationary pressures, higher labor costs, tariff policy, labor shortages, supply chain challenges and changes in consumer and merchant behavior. In addition, recent and potential future changes to trade and tariff policies may introduce increased pricing volatility and overall uncertainty into our operations. To minimize the impact of macroeconomic conditions on our business, and to create value for our merchants and customers, we are focusing on building long-term relationships with local merchants to enhance our inventory selection, improving the customer experience through inventory curation and expanding convenience in order to drive customer demand and purchase frequency.

Results of Operations

North America

Operating Metrics

North America segment gross billings and units for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

North America TTM active customers for the trailing twelve months ended March 31, 2025 and 2024 were as follows (in thousands):

Comparison of the Three Months Ended March 31, 2025 and 2024:

North America gross billings and TTM active customers increased by $13.6 million and 0.2 million, while units decreased 0.1 million for the three months ended March 31, 2025 compared with the prior year period. As a result of our supply transformation efforts and favorable refund rates our Local category experienced growth in gross billings, active customers and units. The Local category growth is offset by a de-emphasis on our Goods category evidenced by a decrease of our Goods active customers that resulted in fewer unit sales and lower gross billings year over year in the Goods category.

Financial Metrics

North America segment revenue, cost of revenue and gross profit for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Comparison of the Three Months Ended March 31, 2025 and 2024:

North America revenue, cost of revenue and gross profit decreased by $3.0 million, $1.8 million and $1.3 million for the three months ended March 31, 2025 compared with the prior year period. While Local billings grew year over year, our Local revenue remained relatively flat as a result of higher redemption rates as well as lower deal margins. Our Goods revenue decrease was driven by a de-emphasis on our Goods category. The decrease in cost of revenue is primarily due to a decrease in amortization of internally-developed software relating to customer-facing applications. Our Travel category showed slight decreased activity year over year due to lower site traffic. Gross profit decreased due to a decrease in revenue.

Marketing and Contribution Profit

North America marketing and contribution profit for the three months ended March 31, 2025 and 2024 was as follows (in thousands):

Comparison of the Three Months Ended March 31, 2025 and 2024:

North America marketing expense and marketing expense as a percentage of revenue increased for the three months ended March 31, 2025 compared with the prior year period, primarily driven by an increased investment in our performance marketing campaigns.

North America contribution profit decreased for the three months ended March 31, 2025 compared with the prior year period, primarily due to an increase in marketing expense.

International

Operating Metrics

International segment gross billings and units for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

International TTM active customers for the trailing twelve months ended March 31, 2025 and 2024 were as follows (in thousands):

Comparison of the Three Months Ended March 31, 2025 and 2024:

International gross billings, units and TTM active customers decreased by $8.3 million, 0.5 million and 0.9 million for the three months ended March 31, 2025 compared with the prior year period. The Local category decrease was primarily attributable to the exit of our Local business in Italy and a decline in site traffic. There was a year-over-year decrease of $4.6 million in Local gross billings, as well as a decrease of 0.4 million in units, as a direct result of our exit of Italy. The decline in our Goods and Travel categories were primarily attributable to an overall decline in site traffic. In addition, there was a $2.4 million unfavorable impact on gross billings from year-over-year changes in foreign currency exchange rates.

Financial Metrics

International segment revenue, cost of revenue and gross profit for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Comparison of the Three Months Ended March 31, 2025 and 2024

International revenue and gross profit decreased by $2.9 million and $3.0 million, while cost of revenue increased $0.1 million for the three months ended March 31, 2025 compared with the prior year period. The Local category decrease was primarily attributable to the exit of our Local business in Italy and a decline in site traffic. Excluding Italy, the Local category revenue grew year over year. The decline in our Goods and Travel categories were primarily attributable to an overall decline in site traffic. Revenue and gross profit also had unfavorable impacts of $0.6 million and $0.5 million from year-over-year changes in foreign currency exchange rates. Although revenue declined year over year due to our exit from Italy, cost of revenue increased slightly, as cloud-related expenses remained unchanged despite reduced headcount.

Marketing and Contribution Profit

International marketing and contribution profit for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Comparison of the Three Months Ended March 31, 2025 and 2024:

International marketing expense and marketing expense as a percentage of revenue increased for the three months ended March 31, 2025 compared with the prior year period, primarily due to increased investment in our online marketing spend paired with decreased revenue year over year.

International contribution profit decreased for the three months ended March 31, 2025 compared with the prior year period, primarily due to increased investment in our online marketing spend paired with decreased revenue year over year.

Consolidated Operating Expenses

Operating expenses for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

(1) The three months ended March 31, 2025 and 2024 include $7.7 million and $2.3 million of stock-based compensation expense and $3.4 million and $5.3 million of depreciation and amortization expense.

Comparison of the Three Months Ended March 31, 2025 and 2024:

Marketing expense and marketing expense as a percentage of gross profit increased for the three months ended March 31, 2025 compared with the prior year period, due to an increased investment in our North America performance marketing campaigns.

SG&A and SG&A as a percentage of gross profit decreased for the three months ended March 31, 2025 compared with the prior year period, primarily due to a decrease in cloud costs and amortization of internally developed software relating to non-customer facing applications. The decrease was partially offset by an increase in stock-based compensation.

Consolidated Other Income (Expense), Net

Other income (expense), net includes interest expense, interest income and foreign currency gains and losses, primarily resulting from intercompany balances with our subsidiaries that are denominated in foreign currencies.

Other income (expense), net for the three months ended March 31, 2025 and 2024 was as follows (in thousands):

Comparison of the Three Months Ended March 31, 2025 and 2024:

The change in Other income (expense), net for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 is primarily related to a $21.9 million favorable change in net foreign currency gains (losses) which primarily resulted from U.S. dollar-denominated intercompany balances with our foreign subsidiaries. The gains, net were primarily driven by the Euro appreciation against the U.S. dollar during the three months ended March 31, 2025.

Consolidated Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Comparison of the Three Months Ended March 31, 2025 and 2024:

The effective tax rates for the three months ended March 31, 2025 and 2024 were impacted by the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets and in the quarter ended March 31, 2025, a benefit due to a tax refund received during the quarter. For the three months ended March 31, 2025 and 2024, we continue to maintain a full valuation allowance against all U.S. federal and state deferred tax assets. We expect that our consolidated effective tax rate in future periods may continue to differ significantly from the U.S. federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses.

See Item 1, Note 10, Income Taxes, for additional information relating to tax audits and assessments and regulatory and legal developments that may impact our business and results of operations in the future.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with GAAP, we have provided the following non-GAAP financial measures: Adjusted EBITDA, free cash flow and foreign currency exchange rate neutral operating results. Those non-GAAP financial measures, which are presented on a continuing operations basis, are intended to aid investors in better understanding our current financial performance and prospects for the future as seen through the eyes of management. We believe that those non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define non-GAAP measures differently than we define them, even when similar terms are used to identify such measures). However, those non-GAAP financial measures are not intended to be a substitute for those reported in accordance with GAAP.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP performance measure that we define as Net income (loss) from continuing operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation and other special charges and credits, including items that are unusual in nature or infrequently occurring. Our definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. Adjusted EBITDA is a key measure used by our management and Board to evaluate operating performance, generate future operating plans and make strategic decisions. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board. However, Adjusted EBITDA is not intended to be a substitute for Net income (loss) from continuing operations.

We exclude stock-based compensation expense and depreciation and amortization because they are primarily non-cash in nature and we believe that non-GAAP financial measures excluding those items provide meaningful supplemental information about our operating performance and liquidity. For the three months ended March 31, 2025 and 2024, special charges and credits included charges related to our to our Italy Restructuring Plan, 2022 Restructuring Plan and 2020 Restructuring Plan. We exclude special charges and credits from Adjusted EBITDA because we believe that excluding those items provides meaningful supplemental information about our core operating performance and facilitates comparisons with our historical results.

The following is a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure, Net income (loss) from continuing operations, for the three months ended March 31, 2025 and 2024 (in thousands):

(1) Stock-based compensation excludes expense related to the 2024 Executive PSUs that are required to be settled in cash. Refer to Item 1, Note 7, Stockholder's Equity for more information.

Free cash flow. Free cash flow is a non-GAAP liquidity measure that comprises net cash provided by operating activities from continuing operations less purchases of property and equipment and capitalized software. We use free cash flow to conduct and evaluate our business because, although it is similar to cash flow from continuing operations, we believe that it typically represents a more useful measure of cash flows because purchases of fixed assets, software developed for internal use and website development costs are necessary components of our ongoing operations. Free cash flow is not intended to represent the total increase or decrease in our cash balance for the applicable period.

Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. In addition, free cash flow reflects the impact of the timing difference between when we are paid by customers and when we pay merchants and suppliers. Therefore, we believe it is important to view free cash flow as a complement to our Condensed Consolidated Statements of Cash Flows. For a reconciliation of free cash flow to the most comparable GAAP financial measure, see Liquidity and Capital Resources below.

Foreign currency exchange rate neutral operating results. Foreign currency exchange rate neutral operating results show current period operating results as if foreign currency exchange rates had remained the same as those in effect in the prior year period. Those measures are intended to facilitate comparisons to our historical performance.

The following tables represent the effect on our Condensed Consolidated Statements of Operations from changes in exchange rates versus the U.S. dollar for the three months ended March 31, 2025 (in thousands):

(1) Represents the financial statement balances that would have resulted had exchange rates in the reporting period been the same as those in effect in the prior year period.

(2) Represents the increase or decrease in the reported amount resulting from changes in exchange rates from those in effect in the prior year period.

Liquidity and Capital Resources

Our principal source of liquidity is our cash balance totaling $226.8 million as of March 31, 2025. The Company’s cash requirements are subject to change as business conditions warrant and opportunities arise. Additionally, with the Rights Offering, termination of our Credit Agreement in February 2024, and the Exchange and Subscription Agreements in November 2024, we believe that the Company has sufficient liquidity to support its overall ongoing operational needs within the next 12 months, as well as the repayment of the 2026 Notes upon maturity in March 2026.

We are subject to claims for tax assessments by foreign jurisdictions, including a proposed Assessment for $123.5 million (€114.2 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 formerly relating specifically to the local voucher business in Italy. In December 2024, Groupon S.r.l. received an unfavorable ruling at the second-level tax court. The Company continues to believe that the Assessment is without merit and Groupon S.r.l. has appealed to the Italian Supreme Court. If Groupon S.r.l. loses that appeal, Groupon S.r.l. plans to further challenge the Assessment and seek relief in an international mutual agreement procedure that would involve the tax authorities of Ireland and Italy.

Under Italian tax court procedures, taxpayers are required to deposit “provisional payments” while tax appeals are pending, which are held in trust by tax authorities and returned to the taxpayer if the taxpayer prevails on the appeal. At present, Groupon S.r.l. would be required to deposit provisional amounts equal to two-thirds of the assessed amount. However, Groupon S.r.l. has sought and obtained approval of installment plans whereby the provisional payments may be deposited pro rata in monthly installments over seventy-two months. A third provisional amount (equal to the remaining third of the Assessment) is set to come due in October 2025. However, Groupon S.r.l. filed a motion for a full stay of the provisional payment obligations on April 18, 2025. Groupon S.r.l. expects a hearing on the possible stay of provisional payments to take place in the second or third quarter of 2025. If Groupon S.r.l. does not succeed in staying the provisional payment obligation, Groupon S.r.l. will consider its options, including making monthly installment payments up to the amount of its assets, or undertaking further restructuring actions. The total payments due in 2025 under the terms of the installment plans total $14.2 million (€13.2 million). Such amounts are recorded as Other non-current assets within the Condensed Consolidated Balance Sheets when cash is remitted.

The Company continues to expect that the Assessment will not result in financial exposure that exceeds the amounts disclosed in its Form 8-K, filed on April 15, 2024. We do not expect any related developments to impact the ability of the Company to meet its obligations outside of Groupon S.r.l. See Item 1, Note 10, Income Taxes for additional information.

Our net cash flows from operating, investing and financing activities from continuing operations for the three months ended March 31, 2025 and 2024 were as follows (in thousands):

Our free cash flow for the three months ended March 31, 2025 and 2024 and a reconciliation to the most comparable GAAP financial measure, Net cash provided by (used in) operating activities from continuing operations, for those periods were as follows (in thousands):

Our revenue-generating transactions are primarily structured such that we collect cash up-front from customers and pay third-party merchants at a later date, either based upon the customer's redemption of the related voucher or fixed payment terms, which are generally biweekly, throughout the term of the merchant's offering.

Our cash balances fluctuate significantly throughout the year based on many variables, including changes in gross billings and the timing of payments to merchants and suppliers.

Net cash provided by (used in) operating activities

For the three months ended March 31, 2025, our net cash used in operating activities from continuing operations was $22.0 thousand as compared with net cash used in operating activities from continuing operations of $10.1 million in the prior period. The increase in operating cash flow for the current period is primarily attributed to the timing of accounts receivable and merchant payable. Specifically, we experienced faster collections from our payment processors, which led to a reduction in accounts receivable. This improvement in cash collections positively impacted our cash flows. Strategic supplier payments in late 2024 decreased merchant payable entering 2025, resulting in a lower beginning merchant payable balance for the current period. We resumed regular payment cycles during the three months ended March 31, 2025 which led to lower merchant payable activity, directly supporting improved cash flow in the current period.

Net cash provided by (used in) investing activities

For the three months ended March 31, 2025, our net cash used in investing activities from continuing operations was $3.7 million as compared with net cash used in investing activities from continuing operations of $3.9 million in the prior period. The investing activities from continuing operations during the three months ended March 31, 2025 remained relatively consistent to the prior period.

Net cash provided by (used in) financing activities

For the three months ended March 31, 2025, our net cash used in financing activities from continuing operations was $0.5 million as compared with net cash provided by financing activities from continuing operations of $35.3 million in the prior period. The year-over-year change from financing activities is primarily due to $79.6 million of proceeds received from the Rights Offering, partially offset by an increase of $42.8 million in payments of borrowings under our revolving credit facility for the three months ended March 31, 2024.

Matters related to the Rights Offering and Credit Agreement

On January 22, 2024, we announced the closing of our $80.0 million fully backstopped Rights Offering for shares of our Common Stock. Pursuant to the terms of the Rights Offering, 7,079,646 shares of Common Stock were purchased at $11.30 per share, generating $80.0 million in gross proceeds to the Company.

On February 12, 2024, we prepaid the Payoff Amount to terminate all commitments to extend further credit under the Credit Agreement using a portion of our $80.0 million in proceeds received from the Rights Offering. The terms of the Rights Offering permit the Company to use the proceeds for general corporate purposes, including the repayment of debt. We were not subject to any early termination penalties under the Credit Agreement. The payment of the Payoff Amount terminated our obligations under the Credit Agreement, except for ordinary and customary survival terms. In addition, we retained access to letters of credit, originally available under the Credit Agreement.

See Item 1, Note 5, Financing Arrangements, for additional information regarding the Credit Agreement and Item 1, Note 7*, Stockholders' Equity (Deficit) and Compensation Arrangements,* for additional information regarding the Rights Offering.

Matters related to the 2026 Notes and 2027 Notes

In 2021, we issued the 2026 Notes in the principal amount of $230.0 million.

The 2026 Notes bear interest at a rate of 1.125% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, with an annual effective interest rate of 1.83%.

On November 19, 2024, we issued $197.3 million aggregate principal amount of 2027 Notes. From the issuance, we (i) exchanged $176.3 million aggregate principal amount of the 2026 Notes and (ii) issued and sold to certain Offering Participants $21.0 million additional principal amount of the 2027 Notes for gross cash proceeds of $20.0 million. We used the $20.0 million of the cash proceeds to offset the cash outflows associated with the debt issuance costs as well as general corporate purposes.

The 2027 Notes bear interest at a rate of 6.25% per annum, payable semi-annually March 15 and September 15 of each year, and will mature March 15, 2027, subject to earlier repurchase or conversion. We may be required to pay additional interest of 2.5% per annum of the 2027 Notes in the event that we fail to pledge certain assets as part of the collateral for the 2027 Notes, unless such assets are sold, by November 20, 2025.

See Item 1, Note 5, Financing Arrangements, for additional information regarding the 2026 Notes and 2027 Notes.

Other Liquidity and Capital Resource matters

As of March 31, 2025, we had $85.4 million in cash held by our international subsidiaries, which is primarily denominated in British Pounds Sterling, Euros, Indian Rupees and Australian dollars. In general, it is our practice and intention to re-invest the earnings of our non-U.S. subsidiaries in those operations or remit such earnings in a tax-efficient manner. We have not, nor do we currently anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of March 31, 2025, did not materially change from the amounts set forth in our 2024 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2025.

Significant Accounting Policies and Critical Accounting Estimates

The preparation of Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenue and expenses, and related disclosure of contingent liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. Our significant accounting policies are discussed in Part II, Item 8, Note 2, Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition, refer to the critical accounting estimates under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024.

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business, including the effect of foreign currency fluctuations, interest rate changes and inflation. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.

Foreign Currency Exchange Risk

We transact business in various foreign currencies other than the U.S. dollar, principally the Euro, British Pound Sterling, Canadian dollar, Indian Rupee, Polish Zloty, Czech Koruna, and, to a lessor extent, Swiss Franc and Australian dollar, which exposes us to foreign currency risk. For the three months ended March 31, 2025, we derived approximately 22.2% of our revenue from our International segment. Revenue and related expenses generated from our international operations are generally denominated in the local currencies of the corresponding countries. The functional currencies of our subsidiaries that either operate or support these markets are generally the same as the corresponding local currencies. However, the results of operations of, and certain of our intercompany balances associated with, our international operations are exposed to foreign currency exchange rate fluctuations. Upon consolidation, as exchange rates vary, our revenue and other operating results may differ materially from expectations, and we may record significant gains or losses on the re-measurement of intercompany balances.

We assess our foreign currency exchange risk based on hypothetical changes in rates utilizing a sensitivity analysis that measures the potential impact on working capital based on a 10% change (increase and decrease) in currency rates. We use a current market pricing model to assess the changes in the value of the U.S. dollar on foreign currency denominated monetary assets and liabilities. The primary assumption used in this model is a hypothetical 10% weakening or strengthening of the U.S. dollar against those currency exposures as of March 31, 2025 and December 31, 2024.

As of March 31, 2025, our net working capital surplus (defined as current assets less current liabilities) from subsidiaries that are subject to foreign currency translation risk was $12.3 million. The potential increase in this working capital surplus from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be $1.2 million. This compares with a $8.3 million working capital surplus subject to foreign currency exposure as of December 31, 2024, for which a 10% adverse change would have resulted in a potential increase in this working capital surplus of $0.8 million.

Interest Rate Risk

Our cash balance as of March 31, 2025, consists of bank deposits so exposure to market risk for changes in interest rates is limited. The 2026 Notes and 2027 Notes have an aggregate principal amount of $53.7 million and $196.2 million, respectively, and bear interest at a fixed rate, so we have no financial statement impact from changes in interest rates. However, changes in market interest rates impact the fair value of the 2026 Notes and 2027 Notes along with other variables such as our credit spreads and the market price and volatility of our Common Stock. See Item 1, Note 5, Financing Arrangements, for additional information.

Inflation Risk

Our business is affected by changes to our merchants' and customers' discretionary spend. We expect such discretionary spend limitations to continue, and if we do not see increased overall demand for discounted goods and services to help offset these limitations on individual merchants and customers, our business, financial condition and results of operations could be adversely impacted. Additionally, periods of increased inflation could negatively impact our business by driving up our operating costs. Our costs are subject to inflationary pressures, and if those pressures become significant, we may not be able to offset such higher costs through price increases or other cost efficiency measures. Our inability or failure to do so could harm our business, financial condition and results of operations.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2025.

Based on that evaluation and because of the previously-reported material weaknesses in internal control over financial reporting, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of March 31, 2025.

Notwithstanding the material weakness in our internal control over financial reporting, our CEO and CFO have concluded that the Condensed Consolidated Financial Statements present fairly, in all material respects, our financial position, results of operations and cash flows in accordance with GAAP.

Remediation Plan and Status

Management, with the oversight of the audit committee of our Board, continues to dedicate resources and efforts to improve our internal controls over financial reporting and has taken the following actions towards remediating the material weakness relating to complex manual calculations.

• Designed new controls and enhanced existing controls for complex manual processes including controls to reconcile source data across accounts and additional review procedures within account reconciliations
• Automated reporting for certain complex accounting calculations to minimize human error
• Formalized a process to identify and address accounting implications for new initiatives
• Added detective analytic management review controls

While we believe these efforts will improve our internal control over financial reporting and substantially address the root cause of the material weakness, such material weakness will not be remediated until we have concluded, through testing, that our controls are designed and operating effectively for a sufficient period of time.

Changes in Internal Control over Financial Reporting

Except for the enhancements to controls to address the material weakness, management did not identify changes that occurred in our internal control over financial reporting during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2024, except as supplemented below.

Our U.S. and international operations are subject to varied and evolving sociopolitical conditions as well as commercial, employment and regulatory challenges, and our inability to adapt to the diverse and changing landscapes of our U.S. and international markets may adversely affect our business.

Our operations require management attention and resources and also require us to localize our services to conform to a wide variety of local cultures, business practices, laws and policies. Our operations are subject to numerous risks, including the following:

• our ability to maintain merchant and customer satisfaction such that our marketplace will continue to attract high quality merchants;
• our ability to successfully respond to macroeconomic challenges, including but not limited to, inflationary pressures, higher labor costs, tariff policy, labor shortages, supply chain challenges and resulting changes in consumer and merchant behavior and the ability to optimize our supply to take into account consumer preferences at a particular point in time;
• political, economic and civil instability and uncertainty (including macroeconomic conditions impacting us, our customers, merchants, or our vendors, acts of terrorism, civil unrest, labor unrest, violence and outbreaks of war and pandemics or other disease outbreaks);
• disruptions and instability in the international markets in which we operate, including Poland, as a result of the ongoing conflict in Ukraine and the Middle East;
• Challenges in navigating legal and judicial systems in international jurisdictions, which may vary significantly in complexity, efficiency, and enforceability, and where we do not employ legal staff locally, further increasing the difficulty of addressing and resolving disputes;
• currency exchange rate fluctuations;
• strong local competitors who may better understand the local market and/or have greater resources in the local market;
• different regulatory or other legal requirements (including potential fines and penalties that may be imposed for failure to comply with those requirements), such as regulation of gift cards and coupon terms, Internet services, professional selling, distance selling, bulk emailing, privacy and data protection (including GDPR), cybersecurity, business licenses and certifications, taxation (including the European Union's voucher directive, digital service tax and similar regulations and any audits), consumer protection laws including those restricting the types of services we may offer (e.g., medical-related services), banking and money transmitting, that may limit or prevent the offering of our services in some jurisdictions, cause unanticipated compliance expenses or limit our ability to enforce contractual obligations;
• our ability to use a common technology platform in our North America and International segments to operate our business without significant business interruptions or delays;
• difficulties in integrating with local payment providers, including banks, credit and debit card networks and electronic funds transfer systems;
• the ability to quickly and effectively consult with, negotiate and seek the consent or opinion of, various employee groups, our international workers' councils and trade unions that represent our international employees on various matters including restructuring actions, strategic decisions, any changes to our activities or employee benefits and other business critical matters, which could result in the delay of executing key actions or product delivery and increase costs;
• the local legal restrictions relating to employment and staffing;
• difficulty in staffing, including attracting and retaining talent with an appropriate level of skill and experience, including knowledge and experience in developing and managing foreign operations,

including through centralized shared service centers, as a result of distance, language barriers and cultural differences;

• periodic reductions in business activity;
• expenses associated with localizing our products; and
• differing intellectual property laws.

We are subject to complex laws and regulations that apply to our international operations, such as data privacy and protection requirements, including GDPR, the FCPA, the UK Anti-Bribery Act and similar local laws prohibiting certain payments to government officials, banking and payment processing regulations and anti-competition regulations, among others. The cost of complying with these various, and sometimes conflicting, laws and regulations is substantial. We have implemented and continue to implement policies and procedures to ensure compliance with these laws and regulations, however, we cannot ensure that our employees, contractors, or agents will not violate our policies. Changing laws, regulations and enforcement actions in the United States and throughout the world could harm our business. If commercial and regulatory constraints in our international markets restrict our ability to conduct our operations or execute our strategic plan, our business may be adversely affected.

To the extent any of the recently enacted tariffs remain in place for a sustained period of time, or in the event a global or domestic economic downturn results therefrom, the disposable income of our customers could be significantly reduced, which may result in a decline in demand for some or all our goods and services, which could adversely affect our results of operations and financial condition.