Groupon, Inc. (GRPN) FY 2022 MD&A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our Consolidated Financial Statements and related notes included under Item 8 of this Annual Report on Form 10-K. 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 Item 1A, Risk Factors, and elsewhere in this Annual Report. See Part I, Forward-Looking Statements, for additional information. For further discussion regarding operating and financial data for the year ended December 31, 2021 as compared to the year ended December 31, 2020, refer to 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 fiscal year ended December 31, 2021.

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 in three categories, Local, Goods and Travel. See Item 8, Note 18, Segment Information, for additional information.

Currently, we generate service revenue from Local, Travel, and Goods categories. Service revenue primarily represents the net commissions earned from selling goods or services on behalf of third-party merchants. Service 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 fully transitioned to a third-party Goods marketplace in North America in 2020 and in International in 2021. In prior periods, we generated product revenue from our sales of first-party Goods inventory and product revenue was reported on a gross basis as the purchase price received from the customer.

Strategy

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 improve our inventory selection and improving the customer experience through inventory curation and improved convenience in order to drive customer demand and purchase frequency.

Macroeconomic Conditions

The COVID-19 pandemic has changed the environment that our business operates in, which includes changes in consumer behavior and macroeconomic impacts affecting both us and our merchants. Certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time. Impacts to our operations may be caused by macroeconomic trends such as inflationary pressures, higher labor costs, labor shortages and resulting changes in consumer and merchant behavior.

2022 Cost Savings Plan

In August 2022, we initiated a multi-phase cost savings plan designed to reduce our expense structure to align with our go-forward business and financial objectives (the “2022 Cost Savings Plan”). The 2022 Cost Savings Plan included a restructuring plan, approved by our Board on August 5, 2022 (the “2022 Restructuring Plan”), as well as other planned savings to be achieved through other actions, such as future reductions in our facilities footprint at natural lease terminations (or by exercising existing options in leases) and elective decisions to eliminate vacant positions rather than rehire. We estimate that the first phase of the 2022 Cost Savings Plan could result in approximately $150.0 million in run-rate cost savings by the end of 2023.

The first phase of the 2022 Restructuring Plan includes an overall reduction of approximately 500 positions globally, with the majority of these reductions completed by the end of 2022 and the remainder in early 2023. In connection with these actions, we expect to record total pre-tax charges of $10.0 million to $20.0 million.

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In January 2023, the Board approved the second phase of the 2022 Restructuring Plan, which includes an overall reduction of approximately 500 positions globally, with the majority of these reductions expected to occur by the end of the second quarter 2023. In connection with the second phase, we expect to record total pre-tax charges of $10.0 million to $20.0 million. We estimate that the payroll actions under the second phase of the 2022 Restructuring Plan could result in approximately $70.0 million in annualized cost savings. We also intend to implement other non-payroll actions outlined within the 2022 Cost Savings Plan, including reducing technology, software, and certain professional services costs. We estimate that these non payroll actions under the second phase of the 2022 Cost Savings Plan could result in approximately $30.0 million in annualized cost savings.

How We Measure Our Business

We use several operating and financial metrics to assess the progress of our business and make decisions on where to allocate capital, time and technology investments. Certain of the financial metrics are reported in accordance with U.S. 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 U.S. 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 service 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 Consolidated Statements of Operations, which is presented net of the merchant's share of the transaction price. As noted above in Overview, beginning in 2021 for our North America segment and 2022 for our International segment, gross billings from our Goods category is primarily reported on a net basis within service revenue. 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 on service revenue transactions 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 Earnings Before Interest, Taxes, Depreciation and Amortization ("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 trailing twelve months ("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.

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Our gross billings, units and TTM active customers for the years ended December 31, 2022 and 2021 were as follows (in thousands):

Financial Metrics

•Revenue is currently earned through service revenue transactions which we generate commissions by selling goods or services on behalf of third-party merchants. Service 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. Service revenue also includes commissions we earn when customers make purchases with retailers using digital coupons accessed through our digital properties. In prior periods, we generated product revenue from our sales of first-party Goods inventory. Our product revenue from these first-party transactions, which were direct sales of merchandise inventory, was the purchase price received from the customer. As noted above in Overview, beginning in 2021 for our North America segment and 2022 for our International segment, revenue from our Goods category is primarily reported on a net basis within service revenue.

•Gross profit reflects the net margin we earn after deducting our cost of revenue from our revenue. In prior periods for our International segment, there is a lack of comparability between product revenue, which was reported on a gross basis, and service revenue, which primarily consists of transactions reported on a net basis. Due to the lack of comparability of revenue generated from our Goods category in prior periods, we believe that gross profit is an important measure for evaluating our performance.

•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, acquisition-related expense (benefit), net and other special charges and credits, including items that are unusual in nature or infrequently occurring. For further information and a reconciliation to 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 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 years ended December 31, 2022 and 2021 (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 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

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paid by the customer. Our gross billings from those transactions generate no service 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.

•Selling, general and administrative ("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 certain facilities-related costs and professional advisory fees. See Item 8, Note 13, 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.

Re-engaging and retaining customers to drive purchase frequency. To re-engage and retain customers to drive purchase frequency, we are focused on strengthening our core marketplace by improving inventory density, the customer experience and trust. In addition to our efforts to improve our inventory density we are exploring opportunities to differentiate our inventory.

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, labor shortages, supply chain challenges and resulting changes in consumer and merchant behavior. We will continue to monitor the impact of macroeconomic conditions on our business.

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Results of Operations

North America

Operating Metrics

North America segment gross billings, units and TTM active customers for the years ended December 31, 2022 and 2021 were as follows (in thousands, except percentages):

Comparison of the Years Ended December 31, 2022 and 2021:

North America gross billings, units and TTM active customers decreased by $375.6 million, 14.0 million and 3.5 million for the year ended December 31, 2022 compared with the prior year. These declines were primarily attributable to a decline in engagement on our platform that resulted in fewer unit sales and lower gross billings.

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Financial Metrics

North America segment revenue, cost of revenue and gross profit for the years ended December 31, 2022 and 2021 were as follows (dollars in thousands):

(1)Represents the percentage of service gross billings that we retained after deducting the merchant's share.

Comparison of the Years Ended December 31, 2022 and 2021:

North America revenue, cost of revenue and gross profit decreased by $170.8 million, $9.3 million and $161.5 million for the year ended December 31, 2022 compared with the prior year. These declines were primarily attributable to a decline in engagement on our platform that resulted in fewer unit sales and lower gross billings.

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Marketing and Contribution Profit

We define contribution profit as gross profit less marketing expense. North America contribution profit for the years ended December 31, 2022 and 2021 was as follows (dollars in thousands):

Comparison of the Years Ended December 31, 2022 and 2021:

North America marketing expense decreased for the year ended December 31, 2022 compared with the prior year primarily driven by accelerated traffic declines and lower spend in our online marketing. North America marketing expense as a percentage of gross profit increased for the year ended December 31, 2022 compared with the prior year driven primarily by a decrease in gross profit.

North America contribution profit decreased for the year ended December 31, 2022 compared with the prior year primarily due to a decrease in gross profit.

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International

Operating Metrics

International segment gross billings, units and TTM active customers for the years ended December 31, 2022 and 2021 were as follows (in thousands, except percentages and gross billings per unit):

Comparison of the Years Ended December 31, 2022 and 2021:

International gross billings, units and TTM active customers decreased by $136.6 million, 4.4 million and 1.0 million for the year ended December 31, 2022 compared with the prior year. These declines were primarily attributable to a de-emphasis on our Goods category, partially offset by higher demand in our Local category and improved customer refund levels. In addition, there was a $65.9 million unfavorable impact on gross billings from year-over-year changes in foreign currency exchange rates.

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Financial Metrics

International segment revenue, cost of revenue and gross profit for the years ended December 31, 2022 and 2021 were as follows (dollars in thousands):

(1)Represents the percentage of service gross billings that we retained after deducting the merchant's share from revenue.

Comparison of the Years Ended December 31, 2022 and 2021:

International revenue, cost of revenue and gross profit decreased by $197.2 million, $144.5 million and $52.8 million for the year ended December 31, 2022 compared with the prior year. Those decreases were primarily due to the transition of Goods to a third-party marketplace model and lower variable consideration from unredeemed vouchers, partially offset by an increase in Local gross billings and improved customer refund levels. Revenue and gross profit also had unfavorable impacts of $18.4 million and $16.9 million from year-over-year changes in foreign currency exchange rates.

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Marketing and Contribution Profit

International contribution profit for the years ended December 31, 2022 and 2021 were as follows (dollars in thousands):

Comparison of the Years Ended December 31, 2022 and 2021:

International marketing expense decreased for the year ended December 31, 2022 compared with the prior year primarily due to accelerated traffic declines, a lower spend in our online marketing and a favorable impact of $5.6 million from year-over-year changes in foreign currency exchange rates. Marketing expense as a percentage of gross profit increased for the year ended December 31, 2022 compared with the prior year due to a decrease in gross profit.

International contribution profit decreased for the year ended December 31, 2022 compared with the prior year primarily due to a decrease in gross profit.

Consolidated Operating Expenses

Operating expenses for the years ended December 31, 2022 and 2021 were as follows (dollars in thousands):

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Comparison of the Years ended December 31, 2022 and 2021:

Marketing expense decreased for the year ended December 31, 2022 compared with the prior year due to accelerated traffic declines and a lower spend in our online marketing. Marketing expense as a percentage of gross profit increased for the year ended December 31, 2022 compared to the prior year due to a decrease in consolidated gross profit.

SG&A decreased for the year ended December 31, 2022 compared with the prior year primarily due to lower payroll-related expenses, partially offset by higher cloud costs. SG&A as a percentage of gross profit increased for the year ended December 31, 2022 compared with the prior year primarily due to a decrease in consolidated gross profit.

During the year ended December 31, 2022, we recognized goodwill and long-lived asset impairment. See Item 8, Note 4, Goodwill and Other Intangible Assets, Note 3, Property, Equipment and Software, Net and Note 8, Leases for additional information. We had no similar activity in the prior year period.

Restructuring and related charges decreased for the year ended December 31, 2022 compared with the prior year due to the substantial completion of the actions of our Board approved multi-phase restructuring plan ("2020 Restructuring Plan") in the year 2021, partially offset by the costs incurred on the 2022 Restructuring Plan. See Item I, Note 13, Restructuring and Related Charges, for additional information.

Consolidated Other Income (Expense), Net

Other income (expense), net includes interest income, interest expense, gains and losses on fair value option investments, impairments of investments, loss on extinguishment of debt 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 years ended December 31, 2022 and 2021 was as follows (dollars in thousands):

Comparison of the Years Ended December 31, 2022 and 2021:

The change in Other income (expense), net for the year ended December 31, 2022 compared with the prior year is primarily related to an unrealized gain of $89.1 million recorded in 2021 as a result of an upward adjustment for an observable price change on an other equity investment and changes in foreign currency gains and losses.

Provision (Benefit) for Income Taxes

Comparison of the Years Ended December 31, 2022 and 2021:

Provision (benefit) for income taxes for the years ended December 31, 2022 and 2021 was as follows (dollars in thousands):

Our U.S. Federal income tax rate was 21% for the years ended December 31, 2022 and 2021.

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The primary factors impacting the effective tax rate for the year ended December 31, 2022 were the pretax losses incurred in jurisdictions that have a valuation allowance against their net deferred tax assets, the reversal of reserves for uncertain tax positions due to closure of applicable statutes of limitations, the non-deductible goodwill impairment, and the valuation allowance recorded against our federal and state deferred tax assets.

The primary factors impacting the effective tax rate for the year ended December 31, 2021 were the release of a portion of the U.S. valuation allowance against our federal and state deferred tax assets, pretax losses incurred in jurisdictions that have a valuation allowance against their net deferred tax assets, and the non-taxable unrealized gain on the observable price change recorded on an other equity investment.

See Item 8, Note 14, 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 U.S. 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 U.S. GAAP.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP performance measure that we define as 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 of Directors to evaluate operating performance, generate future operating plans and make strategic decisions for the allocation of capital. 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 of Directors. However, Adjusted EBITDA is not intended to be a substitute for 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 year ended December 31, 2022, special charges and credits included charges related to our 2022 and 2020 restructuring plans and goodwill and long-lived asset impairments. For the year ended December 31, 2021, special charges and credits included charges related to our 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.

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The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, Income (loss) from continuing operations for the years ended December 31, 2022 and 2021 (dollars in thousands):

(1)Includes $3.0 million of right-of-use assets - operating leases impairment for the year ended December 31, 2022 and $7.7 million of right-of-use assets - operating leases and leasehold improvement impairments for the year ended December 31, 2021. Refer to Item 2, Note 8, Leases and Note 13, Restructuring and Related Charges, for additional information.

(2)Includes a $32.3 million cumulative foreign currency translation adjustment gain that was reclassified into earnings for the year ended December 31, 2021 as a result of the substantial liquidation of our subsidiary in Japan as part of our restructuring actions and an $89.1 million unrealized gain due to an upward adjustment for an observable price change of an other equity investment for the year ended December 31, 2021. Refer to Item 8, Note 13, Restructuring and Related Charges and Note 5, Investments, for additional 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 Consolidated Statements of Cash Flows. For a reconciliation of free cash flow to the most comparable U.S. 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.

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The following table represents the effect on our Consolidated Statements of Operations from changes in exchange rates versus the U.S. dollar for the years ended December 31, 2022 and 2021 (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, which includes outstanding borrowings under the Third Amendment Credit Agreement, totaling $281.3 million as of December 31, 2022.

Our net cash flows from operating, investing and financing activities from continuing operations for the years ended December 31, 2022 and 2021 were as follows (in thousands):

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 from continuing operations. Our free cash flow for the years ended December 31, 2022 and 2021 and reconciliations to the most comparable U.S. GAAP financial measure, Net cash provided by (used in) operating activities from continuing operations, for those periods are 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 gross billings growth rates, the timing of payments to merchants and suppliers and the mix of transactions between Goods and Local.

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Net cash provided by (used in) operating activities

For the year ended December 31, 2022, our net cash used in operating activities from continuing operations was $136.0 million as compared with the prior year period of $124.0 million. The change in net cash used in operating activities was primarily due to lower cash inflows from customers, as a result of lower bookings during the year ended December 31, 2022. The timing of customer purchase to redemption cycles remained relatively consistent year-on-year. This change in net cash used in operating activities was partially offset by a decrease in Marketing spending, a decrease in Selling, general and administrative costs as a result of the impacts of the 2020 Restructuring Plan and the 2022 Cost Savings Plan, and Restructuring and related charges as the actions and costs of the 2020 Restructuring Plan were substantially completed as of December 31, 2021 and the costs related to the first phase of the 2022 Restructuring Plan were less than the costs of the 2020 Restructuring Plan.

For the year ended December 31, 2021, our net cash used in operating activities from continuing operations was $124.0 million, as compared with our $120.3 million income from continuing operations. That difference was primarily attributable to a $224.4 million net decrease from changes in working capital and other non-current assets and liabilities. The working capital impact was largely related to a shortening of the customer purchase to redemption cycle relative to year-end 2020 when redemption patterns were more heavily impacted by COVID-19, resulting in higher merchant payment outflows for the year. The difference between our net cash used in operating activities and our net income from continuing operations is also due to $46.6 million of non-cash items, including $95.6 million of changes in fair value of our investments, $50.7 million of changes in our valuation allowance and a $32.3 million foreign currency translation adjustment gain that was reclassified into earnings as a result of the substantial liquidation of our subsidiary in Japan, partially offset by depreciation and amortization and stock-based compensation.

Net cash provided by (used in) investing activities

For the year ended December 31, 2022, our net cash used in investing activities from continuing operations was $38.8 million, which included purchases of property and equipment and capitalized software of $36.2 million.

For the year ended December 31, 2021, our net cash used in investing activities from continuing operations was $45.8 million, which included purchases of property and equipment and capitalized software of $49.6 million, partially offset by proceeds from the sale of an other equity investment of $7.0 million.

Net cash provided by (used in) financing activities

For the year ended December 31, 2022, our net cash used in financing activities was $34.4 million. Our net cash used in financing activities included $40.0 million in proceeds under our revolving credit agreement, $65.0 million in payments of borrowings under our revolving credit facility and $6.1 million in taxes paid related to net share settlements of stock-based compensation awards.

For the year ended December 31, 2021, our net cash used in financing activities was $183.9 million. Our net cash used in financing activities included payments of $254.0 million for the repurchase of the Atairos Notes, $100.0 million of repayments of borrowings under our revolving credit facility, $27.4 million related to the purchase of capped call transactions, $19.8 million in taxes paid related to net share settlements of stock-based compensation awards and $7.7 million in cash paid for issuance costs for the 2026 Notes, as discussed below, partially offset by $230.0 million of proceeds received from the issuance of the 2026 Notes.

In July 2020, we entered into an amendment to the revolving credit agreement (the "First Amendment") which permanently reduced 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") to, among other things, permit the issuance of the 2026 Notes and related capped call transactions. In September 2022, we entered into a third amendment to the Second Amendment Credit Agreement (the "Third Amendment" and the Second Amendment Credit Agreement as amended, the "Third Amendment Credit Agreement") which reduced borrowing capacity under our senior secured revolving credit facility from $225.0 million to $150.0 million. We remained in compliance with the applicable covenants as of December 31, 2022 under our Third Amendment Credit Agreement. In March 2023, we entered into a fourth amendment to the Third Amendment Credit Agreement (the "Fourth Amendment" and the Third Amendment Credit Agreement as amended, the "Amended Credit Agreement"), which reduces borrowing capacity under our senior secured revolving credit facility from $150.0 million to $75.0 million. In connection with the Fourth Amendment, we repaid $25.0 million of

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outstanding borrowing. Prior to entering into the Fourth Amendment, our access to the full capacity of our Third Amendment Credit Agreement was partially restricted and our liquidity impacted accordingly. There are no assurances that we will be able to continue to have access to the full capacity of our Fourth Amendment Credit Agreement and our liquidity could be impacted accordingly. Additionally, we have contracts in place with multiple payment processors, which give our payment processors in certain instances discretion to impose receivable holdbacks or reserve requirements based on changes to our business model or material changes in our financial condition. Any material increase in receivable holdbacks or reserve requirements could have a material impact on our cash flow and available liquidity.

The accompanying Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.

Our Net cash used in operating activities was $136.0 million and $124.0 million for the years ended December 31, 2022 and December 31, 2021. Cash and cash equivalents were $281.3 million as of December 31, 2022. While we were in compliance with the covenants of our Third Amendment Credit Agreement as of December 31, 2022, our borrowing capacity was restricted and downward revisions to our 2023 forecast indicated we may not be in compliance in future periods. We took steps to amend the credit facility to provide us covenant relief and flexibility in our operations as described in Note 7, Financing Arrangements. These conditions and events raised substantial doubt about our ability to continue as a going concern.

In January 2023, our Board approved the second phase of the 2022 Restructuring Plan, which includes an overall reduction of approximately 500 positions globally. A substantial portion of these reductions occurred in January 2023 and the remaining are expected to occur by the end of the second quarter 2023. We estimate that the second phase of our 2022 Restructuring plan and related costs savings initiatives will result in approximately $100.0 million in annualized cost savings. Further, following the completion of our cloud migration project in February 2023, we have begun to accelerate our efforts to optimize our technology stack and cloud workloads resulting in additional cost savings and we plan to improve the efficiency of our marketing investment resulting in reductions to marketing expense for the remainder of 2023. Management will also take steps to minimize the risk certain payment processors will require reserves or holdback receivables. We believe management's plans as described above are probable of being achieved to alleviate substantial doubt about our ability to continue as a going concern and we will have sufficient liquidity to meet our obligations as they become due over the next twelve months.

We are also currently evaluating several different strategies to enhance our liquidity position. These strategies may include, but are not limited to, pursuing additional actions under our multi-phase cost-savings plan, seeking additional financing from both the public and private markets through the issuance of equity or debt securities, and monetizing certain assets.

As of December 31, 2022, we had $44.2 million in cash held by our international subsidiaries, which is primarily denominated in Euros, British Pounds Sterling, Canadian dollars, and, to a lesser extent, 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 anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business.

In May 2018, the Board authorized us to repurchase up to $300.0 million of our common stock under our share repurchase program. As of December 31, 2022, 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. Repurchases will be made in compliance with SEC rules and other legal requirements and may be made, in part, under a Rule 10b5-1 plan, which permits share repurchases when we might otherwise be precluded from doing so.

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Contractual Obligations and Commitments

For additional information on our commitments for other financing arrangements, future lease payments and purchase obligations, see Item 8, Note 7, Financing Arrangements, Note 8, Leases and Note 9, Commitments and Contingencies for additional information.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2022.

Critical Accounting Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. Our significant accounting policies are discussed in Item 8, Note 2, Summary of Significant Accounting Policies, in the notes to the Consolidated Financial Statements.

The preparation of 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 materially from those estimates under different assumptions or conditions.

We believe that the estimates and assumptions related to going concern, revenue recognition, impairment assessments and income taxes have the greatest potential impact on our Consolidated Financial Statements. Therefore, we consider these to be our critical accounting estimates.

Going Concern

In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.

Determining the extent to which conditions or events raise substantial doubt about our ability to continue as a going concern and the extent to which mitigating plans sufficiently alleviate any such substantial doubt requires significant judgment and estimation by us. Our significant estimates related to this analysis may include identifying business factors such as size, growth and profitability used in the forecasted financial results and liquidity. Further, we make assumptions about the probability that management's plans will be effectively implemented and alleviate substantial doubt and our ability to continue as a going concern. We believe that the estimated values used in our going concern analysis are based on reasonable assumptions. However, such assumptions are inherently uncertain and actual results could differ materially from those estimates. See Item 8, Note 2, Summary of Significant Accounting Policies, for more information about our going concern assessment.

Revenue Recognition

We make significant estimates related to revenue recognition including estimates for refund reserve, variable consideration from vouchers that will not ultimately be redeemed, and breakage income from customer credits that are not expected to be used. We estimate future refunds, voucher redemptions, and customer credit redemptions using historical refund and redemption experience. We also consider trends, such as changes to our policies or in general economic conditions that may impact customer behavior, when making those estimates. We reevaluate our estimate as facts and circumstances change.

These estimates rely on judgments regarding future expectations of customer behavior. While the basis of our estimates is historical data, customer behavior may not always be predictable. If actual refunds or redemptions differ from our estimates, the effects could be material to the Consolidated Financial Statements.

See Item 8, Note 2, Summary of Significant Accounting Policies and Item 8, Note 12, Revenue Recognition,

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for information about our revenue recognition accounting policies.

Impairment Assessments

Impairment assessment estimates apply to goodwill, long-lived assets, right-of-use assets and investments.

Goodwill is allocated to our reporting units at the date the goodwill is initially recorded. 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 review our long-lived assets, such as property, equipment and software, intangible assets, right-of-use assets and investments for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Significant judgment and estimates are required when determining the fair value of these assets for impairment tests.

When determining fair values in impairment tests, we use the income approach (including discounted cash flows). Our significant estimates in those fair value measurements may include identifying business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples. Further, when measuring fair value based on discounted cash flows, we make assumptions about risk-adjusted discount rates; rates of increase in revenue, cost of revenue and operating expenses; weighted average cost of capital; rates of long-term growth; working capital levels; and income tax rates. Valuations are performed by management or third-party valuation specialists under management's supervision, where appropriate. We believe that the estimated fair values used in impairment tests are based on reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ materially from those estimates. See Item 8, Note 3, Property, Equipment and Software, Net, Note 4, Goodwill and Other Intangible Assets, Note 5, Investments and Note 8, Leases for more information about our impairment assessments.

Future changes in our assumptions or the interrelationship of the assumptions described above may negatively impact future valuations. In future measurements of fair value, adverse changes in assumptions could result in impairments of goodwill or long-lived assets that would require non-cash charges to the Consolidated Statements of Operations and those charges could have a material effect on our financial condition and operating results.

See Item 8, Note 2, Summary of Significant Accounting Policies for information about our accounting policies relating to impairment of goodwill and long-lived assets.

Income Taxes

We account for income taxes using the asset and liability method and assess whether it is more likely than not that the deferred tax assets will be realized. We are also subject to taxation in the United States, various states and foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording the related income tax assets and liabilities.

To assess whether it is more likely than not that deferred tax assets will be realized and whether a valuation allowance needs to be recorded against them, we consider the following four sources of taxable income for each tax jurisdiction: (a) future reversals of existing taxable temporary differences, (b) projected future earnings, (c) taxable income in carryback years, and (d) tax planning strategies.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rate could be adversely affected by earnings being lower than anticipated in countries where it has lower statutory rates and higher than anticipated in countries where it has higher statutory rates, by changes in foreign currency exchange rates, by changes in the valuation of deferred tax assets and liabilities, by changes in the measurement of uncertain tax positions, by changes affecting transfer pricing or by changes in the relevant laws, regulations, principles and interpretations.

See Item 8, Note 2, Summary of Significant Accounting Policies, and Note 14, Income Taxes, for information about our income tax accounting policies.

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Recently Issued Accounting Standards

For a description of recently issued accounting standards, please see Item 8, Note 2, Summary of Significant Accounting Policies.

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