Groupon Inc. (GRPN) reported loss per share of 5 cents (including stock-based compensation but excluding non-operational loss of 47 cents) in the fourth quarter 2012, which was wider than the Zacks Consensus Estimate of a loss of 2 cents per share. The non-operational loss was associated to the impairment of a cost method investment in China.
However, when compared on a year-over-year basis, loss per share improved from 8 cents incurred in the year-ago quarter. This improvement was primarily due to higher revenue base.
Though revenues increased 29.7% year over year to $638.3 million, it marginally missed the Zacks Consensus Estimate of $639 million. Sequentially, revenues were up 12.3%.
Region-wise, revenues from North America was up a staggering 108.9% year over year to $375.4 million, aided by robust direct and third-party revenues. However, Groupon’s international revenues decreased 15.9% year over year to $262.9 million due to lower direct revenues.
The strong year-over-year revenue growth was primarily due to higher gross billing, which increased 23.5% year over year to $1.52 billion in the reported quarter. This year-over-year growth can be attributed to a steady increase in the number of active customers, which stood at 41 million as of Dec 31, 2012.
In North America, Groupon’s active customer count grew 22% year over year to 17.2 million and its international customers count jumped 21% to 23.8 million.
The company reported an operating loss of $12.9 million, which was narrower than $15 million lost in the year-ago quarter. Sequentially, the company’s loss widened from a profit of $27.9 million, primarily due to growth in the lower margin direct business and investments to expand local merchant base.
Net loss (including stock-based compensation but excluding non-operational loss was associated to the impairment of a cost method investment in China) came in at $30.5 million, which was narrower than a loss of $42.2 million in the year-ago quarter.
Groupon exited the fourth quarter with cash and cash equivalents worth $1.21 billion and the company had no debt. Cash flow from operating activities was $65.7 million while free cash flow was $25.7 million at the end of fourth quarter.
For the first quarter of 2013, Groupon provided a tepid outlook. The company forecasts revenue to increase in the range of 0% to 9% to $560 million to $610 million, lower than the Zacks Consensus Estimate of $646 million.
Groupon expects operating income to be in the range of ($10.0) million to $10.0 million for the first quarter.
We believe that Groupon is well positioned to gain from rising e-commerce spending on mobile devices, a profitable domestic market and an under-penetrated international market. We expect these opportunities to continue to drive top-line growth going forward.
However, we believe that the market is getting more competitive due to the growing interest from technology stalwarts such as eBay (EBAY), Amazon (AMZN) and Google (GOOG). Moreover, a volatile macro economic environment and continued investments to expand its merchant base are expected to impact results in the near term.
Currently, Groupon has Zacks Rank #3 (Hold).
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