Groupon Whiffs On Earnings, Stock Crashes ... Then Stages An Amazing Comeback

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Groupon CEO Eric Lefkofsky

AP

Groupon CEO Eric Lefkofsky

Groupon earnings are out!

The stock is down in after-hours trading after the company missed analyst estimates on revenue and gave worse than expected guidance. 

An immediate 10% after-hour drop followed a 5% drop during the day. Since September the stock has been falling.

But, after the company's earnings call the stock made a comeback and was up ~1.5%.

The stock's turnaround seems to be thanks to a new plan to allow more sellers on the platform.

In addition to announcing earnings, Groupon announced that it acquired Ticket Monster, an e-commerce company from Korea.

Here are the big numbers versus expectations:

  • Revenues: $595 million versus $615.69 million expected .
  • Earnings per share: $0.02 versus $0.01  expected.
  • Guidance: Q4 EPS $0.00 to $0.02 versus $0.06 expected.
  • Guidance: Q4 Revenue: $690-$740 million versus $723.68 million  expected.

Groupon's core daily deals business — those emails you get every day — suffered another decline. Here is the daily deals revenue over time:

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groupon q3 2013

Groupon / BI

Here's the full earnings release:

Groupon Announces Third Quarter 2013 Results and Agreement to Acquire Ticket Monster
  • Gross billings of $1.34 billion
  • Revenue of $595.1 million
  • GAAP operating income of $13.8 million; $39.2 million excluding stock compensation costs
  • GAAP loss per share of $0.00; earnings per share of $0.02 excluding stock compensation costs

CHICAGO--(BUSINESS WIRE)-- Groupon, Inc. (GRPN) today announced financial results for the quarter ended September 30, 2013.

"Our Local business showed continued strength in the quarter, particularly in North America," said Eric Lefkofsky, CEO of Groupon. "Mobile adoption continued to increase in Q3, reflected in our record 9 million app downloads. We're pleased with our progress, but we still have work to do as we transform the business from our daily deal email roots to a full ecommerce marketplace."

"We're also excited to announce today that we've signed an agreement to acquire Ticket Monster, one of the leading ecommerce companies in Korea," added Lefkofsky. "Ticket Monster has been successful building a mobile commerce business in one of the largest markets in the world. It will serve as the cornerstone of our Asian business, bringing scale and ecommerce expertise to that region."

Third Quarter 2013 Summary

Gross billings, which reflect the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds, increased 10% globally to $1.34 billion in the third quarter 2013, compared with$1.22 billion in the third quarter 2012. North America growth of 20% and EMEA growth of 12% was offset by a 13% decline in Rest of World.

Revenue increased 5% to $595.1 million in the third quarter 2013, compared with $568.6 million in the third quarter 2012. North America revenue growth of 24% was offset by a 21% decline in EMEA and a 4% decline in Rest of World.

Gross profit was $359.6 million in the third quarter 2013, compared with $386.8 million in the third quarter 2012.

Operating income was $13.8 million in the third quarter 2013, compared with $25.4 million in the third quarter 2012. Operating income decreased $13.6 million compared with the second quarter 2013.

Operating income excluding stock compensation and acquisition-related costs, net, a non-GAAP financial measure, was$39.2 million in the third quarter 2013, compared with $50.5 million in the third quarter 2012. Operating income excluding stock compensation and acquisition-related costs, net, decreased $19.9 million compared with the second quarter 2013.

Revenue and operating profit in the third quarter 2012 included a one-time increase of $18.5 million related to breakage, or income related to unredeemed Groupons internationally, resulting from a tax ruling in Germany.

Adjusted EBITDA, a non-GAAP financial measure, was $62.3 million in the third quarter 2013, compared with $65.8 million in the third quarter 2012.

Third quarter 2013 net loss attributable to common stockholders was $2.6 million, or $0.00 per share, including stock compensation and acquisition-related costs, net, of $25.3 million ($17.0 million net of tax). Earnings per share excluding stock compensation and acquisition-related costs, net of tax, a non-GAAP financial measure, was $0.02 per share.

Operating cash flow for the trailing twelve months ended September 30, 2013 was $105.9 million. Free cash flow, a non-GAAP financial measure, was negative $27.0 million in the third quarter 2013, bringing free cash flow for the trailing twelve months ended September 30, 2013 to $22.3 million.

At the end of the quarter, Groupon had $1.1 billion in cash and cash equivalents.

Definitions and reconciliations of all non-GAAP financial measures are included below in the section titled "Non-GAAP Financial Measures" and in the accompanying tables.

Third Quarter Operating Highlights

  • Global units: Consolidated units, defined as vouchers and products sold before cancellations and refunds, increased 9% year-over-year to 46 million. North America units increased 19%, EMEA units increased 1%, and Rest of World units were flat year-over-year.
  • Active deals: At the end of the third quarter 2013, active deals in North America were estimated to be more than 65,000 on average, compared with more than 54,000 at the end of the second quarter 2013.
  • Active customers: Active customers, or customers that have purchased a Groupon within the last twelve months, grew 10% year-over-year, to 43.5 million as of September 30, 2013, comprising 19.9 million in North America, 14.0 million in EMEA, and 9.6 million in Rest of World.
  • Customer spend: Third quarter 2013 trailing twelve month billings per average active customer was $137, compared with $138 in the second quarter 2013.
  • Mobile: In September 2013, North America achieved a milestone, with more than half of transactions completed on mobile devices. This contributed to the more than 40% of transactions completed on mobile devices in the month globally. More than 60 million people have now downloaded Groupon mobile apps worldwide, with more than 9 million people downloading them in the third quarter alone.
  • Marketplace: The rollout of Groupon's marketplace ("Pull") continues to gain traction. In September 2013, approximately 6% of total traffic in North America was related to search activity, with customers that search spending over 25% more than those that do not.

Share Repurchase Program

During the third quarter of 2013, Groupon repurchased 770,900 shares of Class A common stock under its share repurchase authorization at an average price of $11.67 per share, for an aggregate purchase price of $9.0 million. Up to approximately $291 million of Class A common stock remains available for repurchase under the August 2013 share repurchase authorization. The program, which is intended to offset dilution from employee stock grants, terminates in August 2015.

Acquisition of Ticket Monster

Groupon also announced today that it has entered into an agreement to acquire Ticket Monster, a Korean ecommerce company, for aggregate consideration of $260 million, including at least $100 million in cash, and up to $160 million in Groupon Class A common stock, with the final cash and stock allocation to be determined upon close.

Ticket Monster is a leading ecommerce company in South Korea, and a subsidiary of LivingSocial, Inc. Founded in 2010, the Company serves millions of customers with a broad range of product, local and travel offers, and is one of the fastest growing ecommerce companies in the region. Ticket Monster has more than $800 million of annualized billings.

"Ticket Monster is a great fit for Groupon. The team shares our vision, already leveraging a truly mobile marketplace as well as one that has little reliance on email," said Lefkofsky. "Ticket Monster is one of Korea's most recognized and trusted brands, and we're thrilled to have them join the family."

The transaction is currently expected to close in the first half of 2014, subject to regulatory approval by the Korean Fair Trade Commission and the satisfaction of other customary closing conditions.

Outlook

In the fourth quarter 2013, Groupon anticipates normal seasonal strength and strong holiday sales interest, in addition to email headwinds and further investment in marketing initiatives to drive adoption of the Pull marketplace. As a result, for the fourth quarter 2013, the Company expects revenue of between $690 million and $740 million, operating income excluding stock compensation and acquisition-related expenses of between $40 million and $60 million, and earnings per share excluding stock compensation and acquisition-related expenses, net of tax, of between $0.00 and$0.02. Stock compensation is expected to be approximately $30 million, or approximately $20 million net of tax.

As a result, Groupon now expects full year 2013 GAAP operating income of between $72 million and $92 million.

This outlook includes costs related to the acquisition of Ticket Monster. It does not assume any additional impact of this or other acquisitions or investments, or material changes in foreign exchange rates.



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