Published: 2021-11-04 00:00:00 ET

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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, primarily localized groupon.com sites in many countries.

Our operations are organized into two segments: North America and International. See Note 13, Segment Information.

COVID-19 Pandemic

Since March 2020, the COVID-19 pandemic has led to a significant decrease in consumer demand and active customers, a decrease in customer redemptions and elevated refund levels due to changes in consumer behavior and protective measures taken to control the spread of COVID-19. The ongoing COVID-19 pandemic has had an adverse impact on our financial condition, results of operations and cash flows, which has included impairments of our goodwill and long-lived assets. Recovery from the COVID-19 pandemic could be volatile and prolonged given the unprecedented and continuously-evolving nature of the situation.

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 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, 2020.

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 U.S. generally accepted accounting principles ("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.

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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

We adopted the guidance in Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, on January 1, 2021. This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 did not have a material impact on the condensed consolidated financial statements.

We adopted the guidance in ASU 2020-03, Codification Improvements to Financial Instruments, on January 1, 2021. This ASU amends a wide variety of Topics in the Codification, including revolving-debt arrangements and allowance for credit losses related to leases. The adoption of ASU 2020-03 did not have a material impact on the condensed consolidated financial statements.

We early adopted the guidance in ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, on January 1, 2021. The ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of income (loss) per share for convertible instruments and contracts in an entity’s own equity.

Prior to the adoption of ASU 2020-06, we separated the convertible senior notes due 2022 (the "Atairos Notes") into their liability and equity components. Following the adoption of ASU 2020-06, the previously bifurcated equity component of the Atairos Notes was recombined with the liability component, resulting in a single liability-classified instrument. The carrying value of the Atairos Notes at transition was determined by recalculating the basis of the Atairos Notes as if the conversion option had not been bifurcated at issuance. Transaction costs related to the issuance of the Atairos Notes that were allocated to the equity component were reclassified out of Additional paid-in-capital and the amortization and the related debt discount associated with these costs was recalculated through the transition date. The transaction costs were recorded as a debt discount in the condensed consolidated balance sheets and amortized to interest expense over the remaining term of the Atairos Notes. Together with the cash interest, this resulted in an effective interest rate of 3.76%. As a result of adopting ASU 2020-06, we recorded a $67.0 million net reduction to additional paid-in capital, a $19.0 million increase to Convertible senior notes, net and a $48.0 million reduction to our opening accumulated deficit as of January 1, 2021. See Note 5, Financing Arrangements, for additional information.

The following table summarizes goodwill activity by segment for the nine months ended September 30, 2021 (in thousands):

			North America						International						Consolidated
Balance as of December 31, 2020			$	178,685					$	36,014					$	214,699
Other (1)			—						3,776						3,776
Foreign currency translation			—						(1,576)						(1,576)
Balance as of September 30, 2021			$	178,685					$	38,214					$	216,899

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

In accordance with ASC Topic 350, Intangibles — Goodwill and Other, we evaluate goodwill for impairment annually on October 1 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. We also review our long-lived assets, such as property,

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equipment and software, right-of-use assets and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

During the third quarter 2021, we determined the prolonged recovery from the pandemic, particularly in our International segment, and the sustained decrease in our stock price required us to evaluate our goodwill and long-lived assets for impairment. We determined there was no impairment for goodwill; however, we recognized impairment in our right-of-use assets and leasehold improvements under our restructuring plan as noted below. In order to evaluate goodwill for impairment in the third quarter 2021, we compared the fair values of our two reporting units, North America and International, to their carrying values. In determining the fair values of our reporting units, we used the discounted cash flow method under the income approach and the market multiple valuation approach that use Level 3 inputs. The fair value of the reporting units exceeded the carrying value, therefore we concluded that goodwill was not impaired for either of our reporting units during the third quarter 2021.

Due to the circumstances described above, during the third quarter 2021, we evaluated our long-lived assets for impairment. We determined the carrying amount for certain right-of-use assets and leasehold improvements related to our restructuring plan were not fully recoverable due to changes in sublease assumptions. These assets, classified as Level 3 inputs, were written down to fair value based on the discounted cash flow method under the income approach for the three and nine months ended September 30, 2021. See Note 9, Restructuring and Related Charges, for more information on our restructuring and related charges impairments and details in the table below.

During the first quarter 2020, the significant deterioration in our financial performance due to the disruption in our operations from COVID-19 and the sustained decreased in our stock price required us to evaluate our goodwill and long-lived assets for impairment. In determining fair values of our reporting units, we used the discounted cash flow method and the market multiple valuation approach that use Level 3 inputs. For the nine months ended September 30, 2020, we recognized $109.5 million of goodwill impairment and $22.4 million of long-lived asset impairment within our International segment related to our EMEA operations. During the three and nine months ended September 30, 2020, we recognized long-lived asset impairments of $3.3 million and $17.2 million for certain asset groups due to actions taken under our restructuring plan. See Note 9, Restructuring and Related Charges, for additional information.

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

Impairment charges are presented within the following line items of the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Long-lived asset impairment:
North America			$	—					$	—					$	—					$	—
International			—						—						—						22,351
Total Long-lived asset impairment			—						—						—						22,351
Restructuring and related charges:
North America			5,430						834						5,430						14,322
International			2,221						2,462						2,221						2,877
Total Restructuring and related charges impairment			7,651						3,296						7,651						17,199
Total impairment			$	7,651					$	3,296					$	7,651					$	39,550

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The following table summarizes impairment for long-lived assets and restructuring and related charges by asset type for the three and nine months ended September 30, 2021 and 2020 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Property, equipment and software, net
Leasehold improvements			$	870					$	191					$	870					$	7,749
Computer hardware			—						—						—						2,842
Right-of-use assets - finance leases, net			—						70						—						1,388
Internally-developed software			—						—						—						2,988
Other Property, equipment and software, net			—						—						—						929
Total Property, equipment and software, net			870						261						870						15,896
Right-of-use assets - operating leases, net			6,781						3,035						6,781						22,680
Intangible assets, net			—						—						—						103
Other non-current assets			—						—						—						871
Total long-lived assets			$	7,651					$	3,296					$	7,651					$	39,550

The following table summarizes intangible assets as of September 30, 2021 and December 31, 2020 (in thousands):

			September 30, 2021																		December 31, 2020
			Gross Carrying Value						Accumulated Amortization						Net Carrying Value						Gross Carrying Value						Accumulated Amortization						Net Carrying Value
Merchant relationships			$	19,914					$	11,662					$	8,252					$	20,208					$	9,236					$	10,972
Trade names			9,597						8,132						1,465						9,651						7,921						1,730
Developed technology			538						538						—						2,121						1,863						258
Patents			12,225						5,462						6,763						10,813						4,697						6,116
Other intangible assets			17,706						8,376						9,330						17,823						6,748						11,075
Total			$	59,980					$	34,170					$	25,810					$	60,616					$	30,465					$	30,151

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 $2.1 million and $2.5 million for the three months ended September 30, 2021 and 2020 and $6.7 million and $7.4 million for the nine months ended September 30, 2021 and 2020. As of September 30, 2021, estimated future amortization expense related to intangible assets is as follows (in thousands):

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As of September 30, 2021 and December 31, 2020, our carrying value in other equity investments was $122.9 million and $37.7 million. We hold available-for-sale securities and fair value option investments in various entities that had a carrying value of zero as of September 30, 2021 and December 31, 2020. Our percentage ownership in these investments for the periods reported was as follows:

			September 30, 2021												December 31, 2020
			Percent Ownership of Voting Stock												Percent Ownership of Voting Stock
Other equity investments			1%			to			19%						1%			to			19%
Available-for-sale securities - redeemable preferred shares			19%			to			25%						19%			to			25%
Fair value option investments			10%			to			19%						10%			to			19%

During the first quarter 2020, we recognized a $1.4 million loss from changes in the fair value of our fair value option investments.

Other Equity Investments

Other equity investments represent equity investments without readily determinable fair values recorded at cost adjusted for observable price changes and impairments. During the third quarter 2021, we adjusted the carrying value of an other equity investment in a mobile payments company due to an observable price change in an orderly transaction, which resulted in an unrealized gain of $89.1 million for the three and nine months ended September 30, 2021. During the third quarter 2021, we also sold 100% of our shares in an other equity investment for total cash consideration of $2.6 million and recognized a gain of $2.2 million. In the second quarter 2021, we divested our shares in an other equity investment and recognized a gain and total cash consideration of $4.2 million. The gains on our investments have been presented in Other income (expense), net in the condensed consolidated statements of operations for the applicable three and nine months ended September 30, 2021.

The following table summarizes other income (expense), net for the three and nine months ended September 30, 2021 and 2020 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Interest income			$	1,336					$	1,268					$	3,818					$	5,254
Interest expense			(3,534)						(9,408)						(14,123)						(24,375)
Changes in fair value of investments (1)			91,288						—						95,533						(8,089)
Loss on extinguishment of debt			—						—						(5,090)						—
Foreign currency gains (losses), net and other (2)			(6,557)						7,273						17,591						5,661
Other income (expense), net			$	82,533					$	(867)					$	97,729					$	(21,549)

(1)Includes an $89.1 million unrealized gain due to an upward adjustment for an observable price change of an other equity investment for the three and nine months ended September 30, 2021. Refer to Note 3, Investments, for additional information.

(2)Includes a $32.3 million cumulative foreign currency translation adjustment gain that was reclassified into earnings for the nine months ended September 30, 2021 as a result of the substantial liquidation of our subsidiary in Japan as part of our restructuring actions. See Note 9, Restructuring and Related Charges, for additional information.

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The following table summarizes prepaid expenses and other current assets as of September 30, 2021 and December 31, 2020 (in thousands):

			September 30, 2021						December 31, 2020
Prepaid expenses			$	20,404					$	18,038
Income taxes receivable			8,060						5,437
Deferred cloud implementation cost			11,861						4,942
Other			10,102						12,024
Total prepaid expenses and other current assets			$	50,427					$	40,441

The following table summarizes other non-current assets as of September 30, 2021 and December 31, 2020 (in thousands):

			September 30, 2021						December 31, 2020
Deferred income tax			$	11,283					$	11,593
Debt issue costs, net			808						1,852
Deferred contract acquisition costs			6,979						5,315
Deferred cloud implementation costs			5,782						10,402
Other			5,699						5,165
Total other non-current assets			$	30,551					$	34,327

The following table summarizes accrued merchant and supplier payables as of September 30, 2021 and December 31, 2020 (in thousands):

			September 30, 2021						December 31, 2020
Accrued merchant payables			$	215,365					$	303,260
Accrued supplier payables (1)			14,546						107,703
Total accrued merchant and supplier payables			$	229,911					$	410,963

(1)Includes payables to suppliers of inventories and providers of shipping and fulfillment services.

The following table summarizes accrued expenses and other current liabilities as of September 30, 2021 and December 31, 2020 (in thousands):

			September 30, 2021						December 31, 2020
Refund reserve			$	22,239					$	33,173
Compensation and benefits			24,625						54,958
Accrued marketing			21,388						15,299
Restructuring-related liabilities			10,001						13,746
Customer credits			78,217						61,006
Income taxes payable			1,182						7,862
Deferred revenue			3,868						11,223
Operating and finance lease obligations			32,836						37,755
Deferred cloud computing contract incentive			3,000						3,000
Other (1)			44,381						56,977
Total accrued expenses and other current liabilities			$	241,737					$	294,999

(1)Includes $2.9 million in certain payroll taxes under the Coronavirus Aid, Relief and Economic Security ("CARES") Act. These amounts are due by December 31, 2021.

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The following table summarizes other non-current liabilities as of September 30, 2021 and December 31, 2020 (in thousands):

			September 30, 2021						December 31, 2020
Contingent income tax liabilities			$	25,563					$	25,593
Deferred income taxes			3,408						3,170
Deferred cloud computing contract incentive			2,000						4,250
Other (1)			9,686						11,415
Total other non-current liabilities			$	40,657					$	44,428

Adoption of ASU 2020-06

On January 1, 2021, we early adopted ASU 2020-06 using the modified retrospective method. The ASU eliminates the requirement to separately recognize an equity component when accounting for convertible debt that may be cash-settled upon conversion or convertible instruments with a beneficial conversion feature. Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of income (loss) per share for convertible instruments and contracts in an entity’s own equity.

Beginning January 1, 2021, our condensed consolidated financials are presented in accordance with ASU 2020-06, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies. The new guidance changed the accounting for our 3.25% Convertible Senior Notes, due 2022, as discussed below.

3.25% Convertible Senior Notes due 2022

In April 2016, we issued $250.0 million in aggregate principal amount of convertible senior notes (the "Atairos Notes") in a private placement to A-G Holdings, L.P. In May 2021, we repurchased the Atairos Notes for an aggregate purchase price equal to $255.0 million, consisting of the $250.0 million outstanding principal amount, $1.0 million of accrued interest through the repurchase date and a $4.0 million prepayment penalty. In the second quarter 2021, we recognized a $5.1 million loss on the early extinguishment of the Atairos Notes, which is presented in Other income (expense), net on the condensed consolidated statements of operations.

Note Hedges and Warrants

In May 2016, we purchased convertible note hedges with respect to our common stock for a cost of $59.1 million from certain bank counterparties. The convertible note hedges were intended to reduce the potential economic dilution upon conversion of the Atairos Notes. We also sold warrants for total cash proceeds of $35.5 million to certain bank counterparties. The amounts paid and received for the convertible note hedges and warrants were recorded in Additional paid-in capital in the condensed consolidated balance sheets as of December 31, 2020.

In connection with the repurchase of the Atairos Notes, we entered into agreements (collectively "the Unwind Agreements") with each of the bank counterparties in May 2021 to unwind the convertible note hedges and warrants. Pursuant to the terms of the Unwind Agreements, we received cash proceeds of $2.3 million for the settlement of the convertible note hedges and paid cash consideration of $1.3 million for the settlement of the warrants.

1.125% Convertible Senior Notes due 2026

In March and April 2021, we issued $230.0 million aggregate principal amount of convertible senior notes due 2026 (the "2026 Notes") in a private offering to qualified institutional buyers. The net proceeds from this offering were $222.1 million. The 2026 Notes bear interest at a rate of 1.125% per annum, payable semiannually

in arrears on March 15 and September 15 of each year, which began on September 15, 2021. The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion.

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

Each $1,000 of principal amount of the 2026 Notes initially is convertible into 14.6800 shares of common stock, which is equivalent to an initial conversion price of $68.12 per share, subject to adjustment upon the occurrence of specified events. In addition, upon the occurrence of a make-whole fundamental change, as defined in the Indenture governing the 2026 Notes (the "Indenture"), or if we issue a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2026 Notes in connection with such make-whole fundamental change or redemption.

Upon conversion, we can elect to settle the conversion value in cash, shares of our common stock, or any combination of cash and shares of our common stock. Subject to certain conditions, holders of the 2026 Notes may convert the 2026 Notes at their option at any time until the close of business on the scheduled trading day immediately preceding the maturity date. In addition, if specified corporate events occur prior to the maturity date, we may be required to increase the conversion rate for holders who elect to convert based on the effective date of such event and the applicable stock price attributable to the event. Based on the closing price of the common stock of $22.81 as of September 30, 2021, the if-converted value of the 2026 Notes was less than the principal amount.

Certain conditions apply to the conversion by holders and redemption by us of the 2026 Notes, which are set forth in the Indenture governing the 2026 Notes. In addition, upon the occurrence of a fundamental change (as defined in the Indenture) prior to the maturity date, holders may require us to repurchase all or a portion of the 2026 Notes for cash.

The 2026 Notes are our senior unsecured obligations and will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 2026 Notes; equal in right of payment to any of our unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries (including trade payables).

The Indenture includes customary events of default. If an event of default, as defined in the Indenture, occurs and is continuing, the principal amount of the 2026 Notes and any accrued and unpaid interest may be declared immediately due and payable. In the case of bankruptcy or insolvency, the principal amount of the 2026 Notes and any accrued and unpaid interest would automatically become immediately due and payable.

We account for the 2026 Notes as a single liability-classified instrument measured at amortized cost due to the adoption of ASU 2020-06. The carrying value of the 2026 Notes was determined by deducting transaction costs incurred in connection with the issuance of the 2026 Notes of $7.8 million from the principal amount. Those transaction costs were recorded as a debt discount in the condensed consolidated balance sheets and are amortized to interest expense. Together with the cash interest, this results in an effective interest rate of 1.83% over the term of the 2026 Notes. We have presented the 2026 Notes in non-current liabilities in the accompanying condensed consolidated balance sheets.

The carrying amount of the 2026 Notes consisted of the following as of September 30, 2021 (in thousands):

			September 30, 2021
Principal amount			$	230,000
Less: debt discount			(6,972)
Net carrying amount of liability			$	223,028

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 September 30, 2021 was $178.9 million and was determined using a lattice model.

During the three and nine months ended September 30, 2021 and 2020, we recognized total interest costs on the 2026 Notes and the Atairos Notes as follows (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Contractual interest			$	646					$	2,032					$	4,378					$	6,096
Amortization of debt discount			374						3,701						1,226						10,824
Total			$	1,020					$	5,733					$	5,604					$	16,920

Capped Call Transactions

In March and April 2021, in connection with the offering of the 2026 Notes, we entered into privately-negotiated capped call transactions with each of Barclays Bank PLC, BNP Paribas and Mizuho Markets Americas LLC. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the 2026 Notes. The capped call transactions are expected generally to reduce potential dilution to our common stock upon any conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, with such reduction and/or offset subject to a cap initially equal to $104.80 (which represents a premium of 100% over the last reported sale price of our common stock on The Nasdaq Global Select Market on March 22, 2021), subject to certain adjustments under the terms of the capped call transactions.

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

Under the if-converted method, the shares of common stock underlying the conversion option in the 2026 Notes are included in the diluted income (loss) per share denominator and the interest expense and amortization of the debt discount on the 2026 Notes, net of tax, are added to the numerator. However, upon conversion, there will be minimized economic dilution from the 2026 Notes, as exercise of the capped call transactions reduces dilution from the 2026 Notes that would have otherwise occurred when the price of our common stock exceeds the conversion price. The capped call transactions are intended to offset actual dilution from the conversion of the 2026 Notes and to effectively increase the overall conversion price from $68.12 to $104.80 per share.

Revolving Credit Agreement

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

In July 2020, we entered into an amendment to the revolving credit agreement (the "First Amendment") in order to provide us with, among other things, operational flexibility and covenant relief through the end of the first quarter of 2021 in light of the ongoing impacts of COVID-19 on our business. In addition to the covenant relief described below, the First Amendment permanently reduces borrowing capacity under our senior secured revolving credit facility from $400.0 million to $225.0 million.

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

We deferred debt issuance costs of $3.5 million as a result of entering into the Amended Credit Agreement. Deferred debt issuance costs are included within Other non-current assets on the condensed

consolidated balance sheets as of September 30, 2021 and are amortized to interest expense over the term of the respective agreement.

Pursuant to the Amendments, during the Suspension Period, we were exempt from certain covenant restrictions, namely the requirements to maintain a maximum funded indebtedness to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") ratio and a minimum liquidity balance (including any undrawn amounts under the credit facility) of at least 70% of our accrued merchant and supplier payables balance (which covenant applies again beginning in the third quarter 2021 following our voluntary early termination of the Suspension Period). Additionally, the Amendments provide that, during the Suspension Period, we were required to maintain specified minimum quarterly EBITDA levels and to maintain a monthly minimum liquidity balance (including any undrawn amounts under the credit facility) of at least 100% of our accrued merchant and supplier payables balance for such month plus $50.0 million. The Second Amendment also permanently removes requirements that we maintain (i) a maximum senior secured indebtedness to EBITDA ratio and (ii) unrestricted cash of not less than $250.0 million. Finally, the Second Amendment changes the requirement to maintain a minimum fixed charge coverage ratio to a requirement to maintain a minimum interest coverage ratio. Following our voluntary early termination of the Suspension Period, we are subject to the ordinary course covenants under the Amended Credit Agreement beginning in the third quarter 2021.

In addition, under the Amended Credit Agreement, we are subject to various covenants, including customary restrictive covenants that limit our ability to, among other things: incur additional indebtedness; make dividend and other restricted payments, including limiting the amount of our share repurchases; enter into sale and leaseback transactions; make investments, loans or advances; grant or incur liens on assets; sell assets; engage in mergers, consolidations, liquidations or dissolutions; and engage in transactions with related parties and other affiliates. The Amendments further restricted certain of these negative covenants during the Suspension Period, including our ability to make share repurchases, acquisitions, investments and to incur additional indebtedness and liens.

As of September 30, 2021, we were in compliance with the applicable covenants under our Amended Credit Agreement. Non-compliance with the covenants under the Amended Credit Agreement may result in termination of the commitments thereunder and any then outstanding borrowings may be declared due and payable immediately. We have the right to terminate the Amended Credit Agreement or reduce the available commitments at any time.

The Amendments also increased interest rates through the end of the Suspension Period (i.e., through the third quarter 2021), raising the alternative base rate and Canadian prime spreads to 1.50%, the fixed rate spreads to 2.50% and the commitment fee to 0.40% on the daily amount of the unused commitments under the Amended Credit Agreement. Following the Suspension Period, the applicable spread and commitment fee will revert to pre-Amendment levels, which provides for (a) interest at a rate per annum equal to (i) an adjusted LIBO rate or (ii) a customary base rate (with loans denominated in certain currencies bearing interest at rates specific to such currencies) plus an additional margin ranging between 0.50% and 2.00% and (b) commitment fees ranging from 0.25% to 0.35% on the daily amount of unused commitments. The Amended Credit Agreement also includes a replacement mechanism for the discontinuation of the adjusted LIBO rate. In addition, the Amended Credit Agreement provides for the issuance of up to $75.0 million in letters of credit, provided that the sum of outstanding borrowings and letters of credit do not exceed the maximum funding commitment of $225.0 million.

The Amended Credit Agreement is secured by substantially all of our tangible and intangible assets, including a pledge of 100% of the outstanding capital stock of substantially all of our direct and indirect domestic subsidiaries and 65% of the shares or equity interests of first-tier foreign subsidiaries and each U.S. entity whose assets substantially consist of capital stock and/or intercompany debt of one or more foreign subsidiaries, subject to certain exceptions. Certain of our domestic and foreign subsidiaries are guarantors under the Amended Credit Agreement.

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Our contractual obligations and commitments and future operating income under our operating subleases as of September 30, 2021 and through the date of this report, did not materially change from the amounts set forth in our 2020 Annual Report on Form 10-K, except as discussed below.

Purchase Obligations

During the nine months ended September 30, 2021 and through the date of this report, we entered into non-cancellable arrangements. Future payments under these new contractual obligations are as follows (in thousands):

Remaining in 2021			$	1,082
2022			4,935
2023			10,933
2024			14,642
2025			18,000
Thereafter			—
Total			$	49,592

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.

On April 28, 2020, an individual plaintiff filed a securities fraud class action complaint in the United States District Court for the Northern District of Illinois, and in July 2020, another individual was appointed as lead plaintiff. The lawsuit covers the time period from July 30, 2019 through February 18, 2020. The lead plaintiff alleges that Groupon and certain of its officers made materially false and/or misleading statements or omissions regarding its business, operations and prospects, specifically as it relates to reiterating its full year guidance on November 4, 2019 and the Groupon Select program. Plaintiff seeks unspecified compensatory damages and attorneys' fees. Groupon filed a motion to dismiss the complaint and, on April 28, 2021, the Court granted this motion and dismissed the complaint without prejudice. The Court provided the plaintiff with the opportunity to file a motion to seek leave to file an amended complaint, and plaintiff filed a motion for leave to file a second amended complaint, which has the same allegations and class period as the prior complaint. Groupon filed an opposition to plaintiff's motion, and on August 11, 2021, the Court granted plaintiff's motion. Discovery has now commenced in this matter. We intend to continue to vigorously defend the case, which we believe to be without merit.

In addition, on September 9, 2021 a federal derivative lawsuit was filed in the United States District Court for District of Delaware. The lawsuit names Groupon and certain of the Company's former and current officers and directors. The plaintiff alleges that defendants failed to disclose material, non-public information, specifically with respect to the Goods business, Groupon Select program and Groupon's full year guidance reiterated on November 4, 2019. The plaintiff's claims also include allegations of breach of fiduciary duty, unjust enrichment, and waste of corporate assets relating to the Groupon Select program and the sale of stock by certain directors. Plaintiff seeks unspecified damages sustained by the Company, injunctive and equitable relief and attorneys’ fees. We intend to vigorously defend this matter, which we believe to be without merit.

In addition, third parties have from time to time claimed, and others may claim in the future, that we have infringed their intellectual property rights. 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, we have litigated such claims, and we are presently involved in several patent infringement and other intellectual property-related claims, including pending litigation

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or trademark disputes relating to, for example, our Goods category, some of which could involve 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 and regulatory 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, condensed consolidated financial position, results of operations or cash flows. Our accrued liabilities for loss contingencies related to legal and regulatory matters may change in the future as a result of new developments, including, but not limited to, the occurrence of new legal matters, changes in the law or regulatory environment, adverse or favorable rulings, newly discovered facts relevant to the matter, or changes in the strategy for the matter. Regardless of the outcome, litigation and other regulatory matters can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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 September 30, 2021. We estimate that the total amount of obligations that are reasonably possible to arise under the indemnifications in excess of amounts accrued as of September 30, 2021 is 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, particularly in cases where we are entering into new businesses in connection with such

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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.

Common Stock

Pursuant to our restated certificate of incorporation, as of September 30, 2021, the Board had the authority to issue up to a total of 100,500,000 shares of common stock. Each holder of common stock is entitled to one vote per share on any matter that is submitted to a vote of stockholders. In addition, holders of our common stock will vote as a single class of stock on any matter that is submitted to a vote of stockholders.

Share Repurchase Program

In May 2018, the Board authorized us to repurchase up to $300.0 million of our common stock under our share repurchase program. During the three and nine months ended September 30, 2021 and 2020, we did not purchase any shares under the program. As of September 30, 2021, up to $245.0 million of common stock remained available for purchase under our program. The timing and amount of share repurchases, if any, will be determined based on market conditions, limitations under the Amended Credit Agreement, share price, available cash and other factors, and the share repurchase program may be terminated at any time.

Groupon, Inc. Stock Plans

The Groupon, Inc. Stock Plans (the "Plans") are administered by the Compensation Committee of the Board (the "Compensation Committee"). As of September 30, 2021, 2,852,119 shares of common stock were available for future issuance under the Plans.

The stock-based compensation expense related to stock awards issued under the Plans are presented within the following line items of the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Cost of revenue			$	137					$	156					$	498					$	496
Marketing			173						377						486						1,218
Selling, general and administrative			7,894						7,846						24,137						29,223
Restructuring and related charges			—						311						—						1,735
Total stock-based compensation expense			$	8,204					$	8,690					$	25,121					$	32,672

We capitalized $0.9 million and $1.1 million of stock-based compensation for the three months ended September 30, 2021 and 2020, and $2.9 million and $3.4 million for the nine months ended September 30, 2021 and 2020 in connection with internally-developed software and cloud computing arrangements.

Employee Stock Purchase Plan

The Groupon, Inc. 2012 Employee Stock Purchase Plan, as amended, ("ESPP") authorizes us to grant up to 1,000,000 shares of common stock under that plan as of September 30, 2021. For the nine months ended September 30, 2021 and 2020, 49,399 and 69,371 shares of common stock were issued under the ESPP.

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Restricted Stock Units

The restricted stock units granted under the Plans generally have vesting periods between one and four years and are amortized on a straight-line basis over their requisite service period.

The table below summarizes restricted stock unit activity under the Plans for the nine months ended September 30, 2021:

			Restricted Stock Units						Weighted-Average Grant Date Fair Value (per unit)
Unvested at December 31, 2020			1,853,007						$	31.91
Granted			936,875						42.97
Vested			(1,002,467)						29.34
Forfeited			(286,316)						37.54
Unvested at September 30, 2021			1,501,099						$	39.28

As of September 30, 2021, $41.9 million of unrecognized compensation costs related to unvested restricted stock units are expected to be recognized over a remaining weighted-average period of 0.98 years.

Performance Share Units

We grant performance share units under the Plans that vest in shares of our common stock upon the achievement of financial and operational targets specified in the respective award agreement ("Performance Share Units"). During the year ended December 31, 2019, we also granted performance share units subject to a market condition ("Market-based Performance Share Units").

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

The table below summarizes Performance Share Unit activity under the Plans for the nine months ended September 30, 2021:

			Performance Share Units						Weighted-Average Grant Date Fair Value (per unit)						Market-based Performance Share Units						Weighted-Average Grant Date Fair Value (per unit)
Unvested at December 31, 2020			124,709						$	29.73					57,668						$	60.60
Granted (1)			41,729						15.44						—						—
Vested			(86,710)						24.36						—						—
Forfeited			(768)						69.00						—						—
Unvested at September 30, 2021			78,960						27.70						57,668						60.60
Maximum shares issuable upon vesting at September 30, 2021			78,960												57,668

(1)Performance Share Units granted during the nine months ended September 30, 2021 relate to the issuance of incremental shares upon the Compensation Committee's certification of the achievement of the 2020 performance metrics.

As of September 30, 2021, $0.6 million of unrecognized compensation costs related to unvested Performance Share Units are expected to be recognized over a remaining weighted-average period of 1.05 years. We have recognized all compensation costs related to our unvested Market-Based Performance Share Units.

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Refer to Note 13, Segment Information, for revenue summarized by reportable segment and category for the three and nine months ended September 30, 2021 and 2020.

Contract Balances

Our deferred revenue relates to product sales and gift card revenue. Revenue for product sales is recognized as the products are delivered to customers, generally within two weeks following the balance sheet date, while revenue for gift cards is recognized upon customer redemption. Our deferred revenue was $3.9 million as of September 30, 2021. As of December 31, 2020, our deferred revenue was $11.2 million, which was recognized during the nine months ended September 30, 2021.

Customer Credits

We issue credits to customers that can be applied to future purchases through our online marketplaces. Credits are primarily issued as consideration for refunds. To a lesser extent, credits are issued for customer relationship purposes. The following table summarizes the activity in the liability for customer credits for the nine months ended September 30, 2021 (in thousands):

			Customer Credits
Balance as of December 31, 2020			$	61,006
Credits issued			173,476
Credits redeemed (1)			(134,147)
Breakage revenue recognized			(21,084)
Foreign currency translation			(1,034)
Balance as of September 30, 2021			$	78,217

(1)Customer credits can be redeemed through our online marketplaces for goods or services provided by a third-party merchant or for merchandise inventory sold by us. When customer credits are redeemed for goods or services provided by a third-party merchant, service revenue is recognized on a net basis as the difference between the carrying amount of the customer credit liability derecognized and the amount due to the merchant for the related transaction. When customer credits are redeemed for merchandise inventory sold by us, product revenue is recognized on a gross basis equal to the amount of the customer credit liability derecognized. Historically, customer credits have primarily been used within one year of issuance; however, usage patterns have been impacted from changes in customer behavior due to COVID-19.

Costs of Obtaining Contracts

Incremental costs to obtain contracts with third-party merchants, such as sales commissions, are deferred and recognized over the expected period of the merchant arrangement, generally from 12 to 18 months. 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 September 30, 2021 and December 31, 2020, deferred contract acquisition costs were $7.9 million and $6.3 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 $2.6 million and $3.6 million of deferred contract acquisition costs during the three months ended September 30, 2021 and 2020, and $7.8 million and $12.3 million during the nine months ended September 30, 2021 and 2020. We did not recognize any impairments in relation to the deferred contract acquisition costs during the three and nine months ended September 30, 2021 and 2020.

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Allowance for Expected Credit Losses on Accounts Receivable

We establish an allowance for expected credit losses on accounts receivables 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 nine months ended September 30, 2021 (in thousands):

			Allowance for Expected Credit Losses
Balance as of December 31, 2020			$	9,756
Change in provision			517
Write-offs			(1,431)
Foreign currency translation			44
Balance as of September 30, 2021			$	8,886

Variable Consideration for Unredeemed Vouchers

In April 2020, the Board approved a multi-phase restructuring plan of up to $105.0 million of total pretax charges related to our previously announced strategic shift and as part of the cost cutting measures implemented in response to the impact of COVID-19 on our business. We expect to incur total pretax charges of up to $105.0 million through the end of 2021 and have incurred cumulative Restructuring and related charges of $99.0 million since the inception of the restructuring plan. Our restructuring plan includes workforce reductions of approximately 1,600 positions globally, the exit or discontinuation of the use of certain leases and other assets, impairments of our right-of-use and other long-lived assets, and the exit of our operations in Japan and New Zealand. In the first quarter 2021, we substantially liquidated our subsidiary in Japan and reclassified $32.3 million of cumulative foreign currency translation gains into earnings, which is presented in Other income (expense), net on the condensed consolidated statements of operations for the nine months ended September 30, 2021.

The majority of our restructuring charges are expected to be paid in cash and primarily relate to employee severance and benefits expenses, facilities-related costs and professional advisory fees. We will continue to evaluate our cost structure, including additional workforce reductions, as part of our restructuring plan. Costs incurred related to the restructuring plan are classified as Restructuring and related charges on the condensed consolidated statements of operations.

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The following tables summarize costs incurred by segment related to the restructuring plans for the three and nine months ended September 30, 2021 and 2020 (in thousands):

						Three Months Ended September 30, 2021
						Employee Severance and Benefit Costs (Credits)						Legal and Advisory Costs						Property, Equipment and Software Impairments						Right-of-Use Assets Impairments and Lease-related Charges (Credits)						Total Restructuring Charges (Credits)
North America						$	26					$	251					$	602					$	5,610					$	6,489
International						2,600						571						268						2,555						5,994
Consolidated						$	2,626					$	822					$	870					$	8,165					$	12,483

						Nine Months Ended September 30, 2021
						Employee Severance and Benefit Costs (Credits)						Legal and Advisory Costs						Property, Equipment and Software Impairments						Right-of-Use Assets Impairments and Lease-related Charges (Credits)						Total Restructuring Charges (Credits)
North America						$	458					$	1,482					$	602					$	6,974					$	9,516
International						21,665						599						268						2,102						24,634
Consolidated						$	22,123					$	2,081					$	870					$	9,076					$	34,150

						Three Months Ended September 30, 2020
						Employee Severance and Benefit Costs (Credits)						Legal and Advisory Costs						Property, Equipment and Software Impairments						Right-of-Use Assets Impairments and Lease-related Charges (Credits)						Total Restructuring Charges (Credits)
North America						$	1,489					$	435					$	70					$	736					$	2,730
International						14,400						18						195						3,216						17,829
Consolidated						$	15,889					$	453					$	265					$	3,952					$	20,559

						Nine Months Ended September 30, 2020
						Employee Severance and Benefit Costs (Credits)						Legal and Advisory Costs						Property, Equipment and Software Impairments						Right-of-Use Assets Impairments and Lease-related Charges (Credits)						Total Restructuring Charges (Credits)
North America						$	17,548					$	443					$	4,790					$	10,047					$	32,828
International						23,041						759						227						4,182						28,209
Consolidated						$	40,589					$	1,202					$	5,017					$	14,229					$	61,037

As a part of our restructuring plan, we terminated or modified several of our leases. In other cases we vacated our leased facilities, and some of those facilities are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases. We recognized $7.7 million in impairment related to those leases during the three and nine months ended September 30, 2021, and $3.3 million and $17.2 million during the three and nine months ended September 30, 2020. See Note 2, Goodwill and Long-Lived Assets, for additional information. Rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, sublease income, termination and modification gains and losses, and other variable lease costs related to the leased facilities vacated as part of our restructuring plan are presented within Restructuring and related charges in the condensed consolidated statements of operations. The current and non-current liabilities associated with these leases continue to be presented within Other current liabilities and Operating lease obligations in the condensed consolidated balance sheets.

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The following table summarizes restructuring liability activity for each period (in thousands):

			Employee Severance and Benefit Costs						Legal and Advisory Costs						Total
Balance as of December 31, 2019 (1)			$	699					$	—					$	699
Charges payable in cash (2)			36,266						2,137						38,403
Cash payments			(25,328)						(1,289)						(26,617)
Foreign currency translation			1,660						(14)						1,646
Balance as of December 31, 2020			13,297						834						14,131
Charges payable in cash			22,123						2,081						24,204
Cash payments			(24,670)						(2,588)						(27,258)
Foreign currency translation			(768)						77						(691)
Balance as of September 30, 2021 (3)			$	9,982					$	404					$	10,386

(1)Amounts included in the year ended December 31, 2019 are related to prior restructuring plans and the liabilities under those plans have been substantially settled.

(2)Excludes stock-based compensation of $1.7 million related to accelerated vesting of stock-based compensation awards for certain employees terminated as a result of our restructuring activities.

(3)Includes employee severance and benefit costs related to the termination of employees. Substantially all of the remaining cash payments for those costs are expected to be disbursed through 2022.

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) from continuing operations before provision (benefit) for income taxes for the three and nine months ended September 30, 2021 and 2020 was as follows (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Provision (benefit) for income taxes			$	135					$	(486)					$	773					$	(7,170)
Income (loss) from continuing operations before provision (benefit) for income taxes			78,836						(17,047)						90,793						(307,703)

Our U.S. Federal income tax rate is 21%. The primary factors impacting the effective tax rate for the three and nine months ended September 30, 2021 were the benefit of non-taxable items (including the unrealized gain on the observable price change recorded in an other equity investment during the three months ended September 30, 2021), the U.S. research and development tax credit, and reversals of reserves for uncertain tax positions due to the closing of applicable statutes of limitations. The three and nine months ended September 30, 2021 and 2020 were also impacted by the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets. The nine months ended September 30, 2020 were also impacted by the reversals of reserves for uncertain tax positions due to the closure of tax audits and by the carryback of federal net operating losses due to the income tax relief provided by the CARES Act. 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 undergoing income tax audits in multiple 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 assessment for $121.2 million, inclusive of estimated incremental interest from the original assessment. We believe that the assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit and we intend to vigorously defend ourselves in that matter. In addition to any potential increases in our liabilities for uncertain tax positions from the ultimate resolution of that assessment, we believe that it is reasonably possible that reductions of up to $3.2

million in unrecognized tax benefits may occur within the 12 months following September 30, 2021, 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. Additionally, while we did not incur the deemed repatriation tax, 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 September 30, 2021 and December 31, 2020 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.

As of September 30, 2021 and December 31, 2020, we had a valuation allowance recorded against our U.S. deferred tax assets. Given our U.S. current earnings and projected future earnings, we believe that there is a reasonable possibility that within the next three months, sufficient positive evidence may be available to support the conclusion that a valuation allowance will no longer be required. Release of the valuation allowance would result in a decrease to income tax expense in the period the release is recorded. However, the timing and amount of the valuation allowance release could vary based on the level of profitability that we are able to achieve.

Fair value is defined under U.S. 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 various valuation approaches within the fair value measurement framework. The valuation methodologies used for our assets and liabilities measured at fair value and their classification in the valuation hierarchy are summarized below:

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

Contingent consideration. During the first quarter 2021, we settled a contingent consideration arrangement to the former owners of a business acquired in 2018. We use the income approach to value contingent consideration obligations based on future financial performance. We have previously classified our contingent consideration as Level 3 due to the lack of relevant observable market data over fair value inputs such as probability-weighting of payment outcomes.

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The following table provides a roll forward of the fair value of recurring Level 3 fair value measurements for the three and nine months ended September 30, 2021 and 2020 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Assets
Fair value option investments:
Beginning balance			$	—					$	—					$	—					$	1,405
Total gains (losses) included in earnings			—						—						—						(1,405)
Ending balance			$	—					$	—					$	—					$	—
Unrealized gains (losses) still held (1)			$	—					$	—					$	—					$	(1,405)
Liabilities
Contingent consideration:
Beginning balance			$	—					$	278					$	326					$	1,298
Settlements of contingent consideration liabilities			—						—						(393)						(908)
Total losses (gains) included in earnings			—						—						—						6
Foreign currency translation			—						13						67						(105)
Ending balance			$	—					$	291					$	—					$	291
Unrealized gains (losses) still held (1)			$	—					$	—					$	—					$	6

(1)Represents the unrealized gains or losses recorded in earnings and/or other comprehensive income (loss) during the period for assets and liabilities classified as Level 3 that are still held (or outstanding) at the end of the period.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are written down to fair value as a result of an impairment or increased due to an observable price change in an orderly transaction.

We adjusted the carrying value of an other equity investment in a mobile payments company due to an observable price change in an orderly transaction that occurred during the third quarter of 2021, which resulted in an unrealized gain of $89.1 million for the three and nine months ended September 30, 2021. During the third quarter 2021, we sold 100% of our shares in an other equity investment for total cash consideration of $2.6 million and recognized a gain of $2.2 million. In the second quarter 2021, we divested our shares in an other equity investment and recognized a gain and total cash consideration of $4.2 million. In addition, we recognized $6.7 million in impairment charges related to an other equity method investment during the nine months ended September 30, 2020. See Note 3, Investments, for additional information.

We recognized $7.7 million in non-cash impairment charges related to right-of-use assets - operating leases and leasehold improvements during the three and nine months ended September 30, 2021, which is included in Restructuring and related charges on our condensed consolidated statements of operations. We recognized $109.5 million in non-cash impairment charges related to goodwill during the nine months ended September 30, 2020. We also recognized $3.3 million and $39.6 million in non-cash impairment charges related to long-lived assets during the three and nine months ended September 30, 2020, of which $3.3 million and $17.2 million is included in Restructuring and related charges on our condensed consolidated statements of operations. See Note 2, Goodwill and Long-Lived Assets and Note 9, Restructuring and Related Charges, for additional information.

We did not record any other significant nonrecurring fair value measurements after initial recognition for the three and nine months ended September 30, 2021 and 2020.

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

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The following table sets forth the computation of basic and diluted net income (loss) per share of common stock for the three and nine months ended September 30, 2021 and 2020 (in thousands, except share amounts and per share amounts):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Basic and diluted net income (loss) per share:
Numerator
Income (loss) - continuing operations			$	78,701					$	(16,561)					$	90,020					$	(300,533)
Less: Income (loss) attributable to noncontrolling interests			594						(291)						737						1,758
Basic net income (loss) attributable to common stockholders - continuing operations			78,107						(16,270)						89,283						(302,291)
Net income (loss) attributable to common stockholders - discontinued operations			—						—						—						382
Basic net income (loss) attributable to common stockholders			$	78,107					$	(16,270)					$	89,283					$	(301,909)
Diluted net income (loss) attributable to common stockholders - continuing operations			78,107						(16,270)						89,283						(302,291)
Net income (loss) attributable to common stockholders - discontinued operations			—						—						—						382
Diluted net income (loss) attributable to common stockholders			78,107						(16,270)						89,283						(301,909)
Plus: Interest expense from assumed conversion of convertible senior notes			700						—						1,392						—
Net income (loss) attributable to common stockholders plus assumed conversions			$	78,807					$	(16,270)					$	90,675					$	(301,909)
Denominator
Shares used in computation of basic net income (loss) per share			29,567,802						28,751,520						29,282,932						28,535,393
Weighted-average effect of diluted securities
Restricted stock units			351,720						—						712,866						—
Performance share units and other stock-based compensation awards			68,616						—						89,981						—
Convertible senior notes due 2026			3,376,400						—						2,308,112						—
Shares used in computation of diluted net income (loss) per share			33,364,538						28,751,520						32,393,891						28,535,393
Basic net income (loss) per share:
Continuing operations			$	2.64					$	(0.57)					$	3.05					$	(10.59)
Discontinued operations			—						—						—						0.01
Basic net income (loss) per share			$	2.64					$	(0.57)					$	3.05					$	(10.58)
Diluted net income (loss) per share:
Continuing operations			$	2.36					$	(0.57)					$	2.80					$	(10.59)
Discontinued operations			—						—						—						0.01
Diluted net income (loss) per share			$	2.36					$	(0.57)					$	2.80					$	(10.58)

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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 from continuing operations:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Restricted stock units			854,304						1,907,396						410,856						1,879,752
Performance share units and other stock-based compensation awards			—						151,110						—						199,849
Convertible senior notes due 2022 (1)			—						2,314,815						1,144,689						2,314,815
Warrants			—						2,314,815						1,170,126						2,314,815
Capped call transactions			3,376,400						—						2,308,112						—
Total			4,230,704						6,688,136						5,033,783						6,709,231

(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 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.

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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 into two segments: North America and International. Our measure of segment profitability is contribution profit, defined as gross profit less marketing expense, which is consistent with how management reviews the operating results of the segments. Contribution profit measures the amount of marketing investment needed to generate gross profit. Other operating expenses are excluded from contribution profit as management does not review those expenses by segment.

The following table summarizes revenue by reportable segment and category for the three and nine months ended September 30, 2021 and 2020 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
North America
Service revenue:
Local			$	129,131					$	98,561					$	394,358					$	322,945
Goods			9,189						8,787						37,266						18,401
Travel			4,791						4,748						18,893						13,722
Total service revenue			143,111						112,096						450,517						355,068
Product revenue - Goods			—						68,215						626						293,729
Total North America revenue (1)			143,111						180,311						451,143						648,797
International
Service revenue:
Local			46,071						36,528						109,589						103,221
Goods			5,879						3,309						9,429						8,821
Travel			3,915						3,140						8,226						7,368
Total service revenue			55,865						42,977						127,244						119,410
Product revenue - Goods			15,195						80,731						165,559						305,608
Total International revenue (1)			$	71,060					$	123,708					$	292,803					$	425,018

(1)North America includes revenue from the United States of $140.2 million and $177.3 million for the three months ended September 30, 2021 and 2020, and $444.2 million and $640.4 million for the nine months ended September 30, 2021 and 2020. International includes revenue from the United Kingdom of $21.4 million and $42.9 million for the three months ended September 30, 2021 and 2020, and $100.4 million and $151.1 million for the nine months ended September 30, 2021 and 2020. There were no other individual countries that represented more than 10% of consolidated total revenue for the three and nine months ended September 30, 2021 and 2020. Revenue is attributed to individual countries based on the location of the customer.

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The following table summarizes gross profit by reportable segment and category for the three and nine months ended September 30, 2021 and 2020 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
North America
Service gross profit:
Local			$	115,184					$	87,507					$	352,431					$	283,004
Goods			7,864						7,440						31,689						14,851
Travel			3,762						3,874						15,092						9,726
Total service gross profit			126,810						98,821						399,212						307,581
Product gross profit - Goods			—						10,896						168						47,599
Total North America gross profit			126,810						109,717						399,380						355,180
International
Service gross profit:
Local			43,876						33,687						103,495						93,054
Goods			5,587						2,849						8,892						7,422
Travel			3,576						2,711						7,443						6,259
Total service gross profit			53,039						39,247						119,830						106,735
Product gross profit - Goods			1,590						11,058						23,155						36,580
Total International gross profit			$	54,629					$	50,305					$	142,985					$	143,315

The following table summarizes contribution profit by reportable segment for the three and nine months ended September 30, 2021 and 2020 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
North America
Gross profit			$	126,810					$	109,717					$	399,380					$	355,180
Marketing			38,302						19,718						94,247						73,203
Contribution profit			88,508						89,999						305,133						281,977
International
Gross profit			54,629						50,305						142,985						143,315
Marketing			14,857						11,668						36,298						43,555
Contribution profit			39,772						38,637						106,687						99,760
Consolidated
Gross profit			181,439						160,022						542,365						498,495
Marketing			53,159						31,386						130,545						116,758
Contribution profit			128,280						128,636						411,820						381,737
Selling, general and administrative			119,494						124,257						384,606						475,017
Goodwill impairment			—						—						—						109,486
Long-lived asset impairment			—						—						—						22,351
Restructuring and related charges			12,483						20,559						34,150						61,037
Income (loss) from operations			$	(3,697)					$	(16,180)					$	(6,936)					$	(286,154)

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The following table summarizes total assets by reportable segment as of September 30, 2021 and December 31, 2020 (in thousands):

			September 30, 2021						December 31, 2020
Total assets:
North America (1)			$	801,090					$	971,110
International (1)			286,781						440,397
Consolidated total assets			$	1,087,871					$	1,411,507

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