Groupon Inc. (
broke even in the third quarter of 2013, almost flat from the
year-ago quarter and beat the Zacks Consensus Estimate of a loss
of 2 cents.
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Revenues climbed 4.7% year over year to $595.1 million, which
lagged the Zacks Consensus Estimate of $613.0 million. The
year-over-year growth was primarily driven by a 38.0% jump in
direct revenues, which offset a 6.7% decline in third party and
other revenues in the last quarter.
Region wise, revenues from North America increased 23.7% year
over year, which more than offset the 21.0% and 3.8% declines in
revenues from EMEA and Rest of the world (Asia-Pacific and Latin
Growth in revenues was also due to higher gross billing, which
increased 10.2% year over year to $1.34 billion. This growth can
be attributed to a steady increase in the number of active
customers (up 10.0% year over year), which stood at 43.5 million
as of Sep 30, 2013.
Groupon reported that 50.0% of the transactions in North America
were through mobile devices. Moreover, more than 9.0 million
people downloaded Groupon's mobile apps during the quarter, which
led to a robust mobile business. Approximately 40.0% of global
transactions were done through mobile devices in September.
Gross margin plunged 760 basis points (bps) to 60.4% in the
quarter due to unfavorable business mix. However, operating
expenses as a percentage of revenues declined 470 bps to 58.4%
due to lower selling, general & administrative expenses as
well as marketing expenses.
Despite this steep decline in expenses, operating margin
decreased 280 bps due to lower gross margin base in the quarter.
Groupon's net loss (including stock-based compensation but
excluding acquisition-related expenses) was $4.1 million, which
was slightly better than a loss of $5.3 million reported in the
Groupon exited the third quarter with cash and cash equivalents
worth $1.14 billion. Cash used from operating activities was
$11.9 million compared with $43.0 million generated in the
previous quarter. Free cash outflow was $27.0 million compared
with in flows of $29.0 million in the previous quarter. The
company spent $9.0 million on share buyback during the quarter.
Groupon also announced that it has entered into an agreement to
acquire Korean e-commerce company Ticket Monster, a subsidiary of
LivingSocial Inc for $260.0 million. The company expects the
transaction to close in the first half of fiscal 2014.
For the fourth quarter of 2013, Groupon forecasts revenues to be
in the range of $690.0 million to $740.0 million. The company
expects the bottom line to range from breakeven to earnings of 2
cents per share.
Groupon expects operating income (excluding stock-based
compensation and acquisition-related expenses) in the range of
$40.0 million to $60.0 million for the forthcoming quarter.
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, we believe that the market is becoming more competitive
due to the growing interest from technology stalwarts such as
. Moreover, a volatile macro economic environment and continued
investments to expand its merchant base are expected to impact
Currently, Groupon carries a Zacks Rank #3 (Hold).