By Yimian Wu
Groupon Inc. announced its first quarter earnings with improving revenue, growing deals and users and a diminished net loss. Shares dropped 52 cents to $6.32.
In the quarter ended March 31, the Chicago-based online deals marketplace narrowed its net loss to $14.3 million, or 2 cents per diluted share, from a year-earlier loss of $38 million, or 6 cents per diluted share. Analysts estimated a net loss of 0.5 cent per share, according to Bloomberg.
Revenue increased 3 percent to $750.4 million from $728.4 million in the same quarter last year. Revenue in North America had the largest increase of 11.3 percent while revenue in the rest of the world dropped. The stronger dollar negatively impacted the revenue outside the country.
“Changes in FX rates, the euro in particular, negatively impacted the quarter,” said Groupon CEO Eric Lefkofsky in the conference call, “Had they remained neutral to last year we would have delivered $180 million more of billings, 51 million more of revenue, bringing revenue to $802 million, 28 million more of gross profit and 3 million more of adjusted EBITDA.”
Global units, defined as vouchers and products sold before cancellations and refunds, increased 6 percent to 54 million in the first quarter. Active customers grew 7 percent to 48.1 million with half of them in North America. Search-related transactions were approximately 27 percent of the total transactions compared with 20 percent last year.
Groupon’s search-driven marketplace, different from its email-pushed platform, encourages users to dive deeper into the catalog of deals. Gene Munster, analyst at PiperJaffray, wrote in an April 14 note, “The concept is as more deals are posted on Groupon, consumers will begin to check Groupon before they go out.”
The company aims at training the long-term behavior of consumers to check Groupon as a daily habit, said Rich Williams, Groupon’s president in North America, in the conference call.
In April, Groupon announced the sale of a controlling 46 percent interest in Ticket Monster, its South Korean ecommerce business, for $360 million, to a partnership formed by KKR and Hong Kong-based Anchor Equity Partners. The transaction is expected to close in the second quarter this year. The gain on the sale is expected to be between $195 million and $205 million on a pre-tax basis.
Although Ticket Monster contributes a profit to Groupon, analysts consider the sale positive to the company. Mark Mahaney, analyst at RBC Capital Markets, wrote in his April 20 note that it “represents an incremental positive for GRPN shares”.
Tom Forte, analyst at Brean Capital, said in a note last month, “Groupon can apply the incremental capital it would have invested in Ticket Monster to its core, North American operations.”
The company also announced its board of directors approved a new $300 million share repurchase program, subject to the closing of the Ticket Monster sale. Groupon is still buying back shares under a previously-authorized $300 million program.
