Groupon Inc. (
reported first-quarter loss of 4 cents per share (including
stock-based compensation, acquisition-related expenses and tax
impact), which was wider than loss of a penny reported in the
year-ago quarter. However, loss per share was narrower than the
Zacks Consensus Estimate of 7 cents per share.
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Revenues jumped 26.0% year over year to $757.6 million, which
beat the Zacks Consensus Estimate of $734.0 million. The
year-over-year growth was primarily driven by a 104.1% surge in
direct revenues, which offset a 3.0% decline in third party and
other revenues in the reported quarter.
Region-wise, revenues from North America, EMEA and Rest of the
world (Asia-Pacific and Latin America) increased 27.0%, 25.6% and
22.6% year over year, respectively.
Gross billings increased 29.1% year over year to $1.82 billion.
Region-wise, billings from North America, EMEA and Rest of the
world increased 14.7%, 4.3% and 122.9% year over year,
respectively. The strong growth in billings was driven by robust
performance from goods business and TMON.
As of Mar 31, 2014, active customers increased 24.0% year over
year to 51.8 million, comprising 21.8 million in North America,
14.5 million in EMEA and 15.5 million in Rest of the world.
At the end of the quarter, on average, active deals were over
200K globally, compared with more than 140K at the end of
fourth-quarter 2013. North American active deals increased to
Groupon reported that approximately 54.0% of the worldwide
transactions were through mobile devices. Moreover, more than
10.0 million people downloaded Groupon's mobile app during the
quarter, which led to a robust mobile business.
Gross margin decreased from 63.0% to 50.9% in the quarter due to
unfavorable business mix. Adjusted earnings before interest, tax,
depreciation and amortization (EBITDA) were $40.3 million
compared with $71.9 million in the year-ago quarter.
Operating expenses increased 12.9% year over year to $403.9
million due to higher selling, general & administrative
expenses as well as marketing expenses. As a result, operating
loss was $18.2 million compared with operating profit of $21.2
million in the year-ago quarter.
Groupon's net loss (including stock-based compensation but
excluding acquisition-related expenses and tax impact) was $26.5
Groupon exited the first quarter with cash and cash equivalents
worth $1.04 billion compared with $1.24 billion reported in the
previous quarter. Cash outflow from operating activities was
$20.7 million compared with cash flow from operating activities
$178.3 million generated in the previous quarter.
Free cash outflow was $37.1 million compared with $25.7 million
in the previous quarter. The company spent $29.5 million on share
buyback during the quarter.
For the second quarter of 2014, Groupon forecasts revenues in the
range of $725.0 to $775.0 million. The company expect
year-over-year local billings growth in North America in the
second quarter to remain relatively flat on a sequential basis.
North America billings are expected to accelerate post second
quarter, reaching double-digit growth by year-end.
Groupon expects to continue to make steady progress in the EMEA
region throughout 2014, with Local billings returning to stronger
growth by year-end.
Groupon expects EBITDA in the range of $45.0 to $65.0 million for
the quarter. Management expects to report earnings of a penny to
2 cents for the second quarter of 2014. The Zacks Consensus
Estimate is currently pegged at a loss of 2 cents per share.
For fiscal 2014, adjusted EBITDA is expected to be $300.0
We believe that Groupon is well positioned to gain from the
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.
Moreover, increased traction in the mobile business is another
positive for the company.
However, Groupon's back-end loaded EBITDA guidance is a major
concern. We note that in North America, the company continues to
face significant competition not only from the stalwarts like
but also from small companies like
, which is a major headwind in the near term.
Currently, Groupon carries a Zacks Rank #4 (Sell).