Groupon sees Q1 revenue ‘close to or above high end of prior guidance’

In a regulatory filing, the company stated: “As previously disclosed in Groupon Annual Report on Form 10-K for the year ended December 31, 2023, a foreign subsidiary of the Company received an income tax assessment from the tax authority in a foreign jurisdiction in the amount of $120.7 million relating to tax year 2012. The subsidiary subject to the Assessment is Groupon S.r.l., one of the Company’s Italian subsidiaries with operations relating specifically to the local voucher business in Italy. In December 2023, Groupon S.r.l. received an unfavorable ruling at the lowest court level. Groupon S.r.l. lodged an appeal to the second-level court and requested the suspension of the tax authority’s demand that Groupon S.r.l. post an appeal bond of approximately EUR 69 million. On April 9, 2024, the Second Tier Tax Court denied Groupon S.r.l.’s request for a suspension of the appeal bond and set an expedited hearing date of July 9, 2024 on the merits of Groupon S.r.l.’s appeal of the tax assessment. Given this denial, Groupon S.r.l. is required to post an appeal bond consisting of approximately EUR 21 million, due immediately, and approximately EUR 48 million will be required to be posted on or before October 22, 2024, unless the appeal has been resolved by then in Groupon S.r.l.’s favor. Based on Groupon S.r.l.’s current liquidity position, it does not have the ability to post the full amount of the First Appeal Bond Portion. The Italian tax authorities have placed a lien on Groupon S.r.l.’s bank account, which currently restricts outgoing payments from that account. The Company is evaluating its options which include (a) Groupon S.r.l. seeking an agreement with the tax authorities on an installment plan for the bond obligation; (b) Groupon S.r.l. ceasing certain business activities in Italy (relating only to its local business); and (c) taking certain restructuring actions specific to Groupon S.r.l., including, but not limited to, exiting the local business in Italy. In the interim, Groupon S.r.l. will be pausing sales of local vouchers in Italy. Groupon’s online marketplace in Italy (www.groupon.it) will continue to operate and market Groupon goods and travel deals. The Company presently expects the associated revenue loss from pausing local deals in Italy to be approximately EUR 1 million per month. The denial of the suspension of the appeal bond has no impact on the merits of Groupon S.r.l.’s appeal of the Assessment. The Company believes that the Assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit. Groupon S.r.l. has been vigorously defending itself in this matter and believes it will ultimately prevail on the merits of the case, whether before the Italian Courts or as part of a separate International Mutual Agreement Procedure (governing international taxation matters involving multiple European countries) it has initiated. If Groupon S.r.l., loses the current Italian appeal, then it plans to appeal to the highest level of the Italian courts and, if it loses that appeal, it plans to seek relief in an International Mutual Agreement Procedure, whereby some or all of the Assessment could be extinguished depending on final agreement between Italy and Ireland. Even if Groupon S.r.l. ultimately does not prevail in the matter, the Company does not expect the Assessment to result in financial exposure that exceeds the assets of Groupon S.r.l. Furthermore, we do not expect these developments to impact the ability of the Company to meet its obligations outside of Groupon S.r.l. As of December 31, 2023, Groupon S.r.l. has assets of approximately EUR 48 million, made up largely of intercompany receivables and includes approximately EUR 1 million in cash and cash equivalents. The Company does not expect these developments to materially impact its full-year guidance and is reaffirming its previously issued full-year guidance. Based on management’s preliminary, unaudited analysis of financial results for the three months ending March 31, 2024, management is updating its first quarter 2024 financial outlook and cash position as follows: First quarter 2024 revenues to be close to, or above, the high-end of our guidance. First quarter 2024 Adjusted EBITDA to be close to, or above, the high-end of our guidance. March 31, 2024 unaudited cash & cash equivalents of approximately $158 million and approximately $30 million in restricted cash.”