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Groupon Reports Loss in Q2

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Groupon Inc. (GRPN - Free Report) reported a loss per share of 1 cent (including stock-based compensation but excluding acquisition-related benefit) in the second quarter of 2013, which came in narrower than the Zacks Consensus Estimate of a loss of 3 cents. On a year-over-year basis, Groupon’s loss per share worsened from the year-ago quarter’s earnings of 4 cents.

Quarter Details

Groupon’s revenues of $608.7 million lagged the Zacks Consensus Estimate of $613.0 million despite a 7.0% increase from the year-ago quarter. Region wise, revenues from North America increased 45.0% year over year which more than offset the 24.0% and 26.0% declines in revenues from EMEA and Rest of the world (Asia-Pacific and Latin America), respectively.

The strong year-over-year revenue growth was primarily due to the higher gross billing, which increased 9.3% year over year to $1.41 billion. This year-over-year growth can be attributed to a steady increase in the number of active customers (up 12.0% year over year), which stood at 42.6 million as of Jun 30, 2013.

The company reported that 50.0% of the transactions in North America were through mobile devices which increased from 30% in the year-ago quarter. Moreover, more than 7.5 million people downloaded Groupon’s mobile apps during the quarter, which led to a robust mobile business. 

Gross profit for the quarter was down 11.2% from the year-ago quarter to $384.7 million primarily due to take-rate reduction in the International segment. The company reported an operating income (excluding stock-based compensation and acquisition-related expenses) of $59.0 million, which decreased from $71.9 million in the year-ago quarter.

Groupon’s net loss (including stock-based compensation but excluding acquisition-related expenses) was $7.6 million which worsened from $28.4 million net profit in the year-ago period.

Groupon exited the second quarter with cash and cash equivalents worth $1.18 billion. Cash flow from operating activities was $43.3 million. The company authorized a $300 million share buyback plan.


For the third quarter of 2013, Groupon forecasts revenues to increase in the range of $585 million to $635 million. The company expects earnings per share in the range of negative 1 cent to a positive 1 cent.

Groupon expects operating income (excluding stock-based compensation and acquisition-related expenses) in the range of $20.0 million to $40.0 million for the next quarter.

Our Take

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, Groupon’s 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 eBay (EBAY - Free Report) , Amazon (AMZN - Free Report) and Google . Moreover, a volatile macro economic environment and continued investments to expand its merchant base are expected to impact near-term results.

Groupon carries a Zacks Rank #3 (Hold).

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