Groupon Announces First Quarter 2013 Results

Groupon Announces First Quarter 2013 Results

CHICAGO--(BUSINESS WIRE)-- Groupon, Inc. (NAS: GRPN) today announced financial results for the quarter ended March 31, 2013:

  • Gross billings of $1.41 billion

  • Revenue of $601.4 million

  • GAAP operating income of $21.2 million, or $51.2 million excluding stock compensation

  • GAAP loss per share of $0.01, or earnings per share of $0.03 excluding stock compensation

"We are encouraged by our results, as our local revenues accelerated and our margins improved over the prior quarter," said Eric Lefkofsky, Chairman and co-CEO of Groupon. "We had record mobile performance as 45% of our North American transactions came from mobile in March, and more than 7 million people downloaded our apps in the quarter."


First Quarter 2013 Summary

Gross billings, which reflect the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds, increased 4% to $1.41 billion in the first quarter 2013, compared with $1.35 billion in the first quarter 2012. North America growth of 23% was offset by a decline of 9% in the International segment on a year-over-year basis.

Revenue increased 8% to $601.4 million in the first quarter 2013, compared with $559.3 million in the first quarter 2012. North America revenue growth of 42% was offset by a decline of 18% in the International segment on a year-over-year basis.

Gross profit was $379.0 million in the first quarter 2013, compared with $439.8 million in the first quarter 2012.

Operating income was $21.2 million in the first quarter 2013, compared with $39.6 million in the first quarter 2012. Operating income increased $34.0 million compared with fourth quarter 2012.

Operating income excluding stock compensation and acquisition-related costs, a non-GAAP financial measure, was $51.2 million in the first quarter 2013, compared with $67.6 million in the first quarter 2012. Operating income excluding stock compensation and acquisition-related costs increased $37.4 million compared with fourth quarter 2012.

First quarter 2013 net loss attributable to common stockholders was $4.0 million, or $0.01 per share, including stock compensation and acquisition-related costs of $30.0 million, or $20.9 million net of tax. Earnings per share excluding stock compensation and acquisition-related costs, net of tax, a non-GAAP financial measure, was $0.03 per share.

Operating cash flow for the trailing twelve months ended March 31, 2013 was $191.9 million. Free cash flow, a non-GAAP financial measure, was negative $5.7 million in the first quarter 2013, bringing free cash flow for the trailing twelve months ended March 31, 2013 to $94.7 million.

At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents.

Definitions and reconciliations of all non-GAAP financial measures are included below in the section titled "Non-GAAP Financial Measures" and in the accompanying tables.

First Quarter Operating Highlights

  • Global units: Consolidatedunits, defined as vouchers and products ordered before cancellations and refunds, increased 4% year-over-year to 45 million. North America units increased 37%, and International units decreased 18%.

  • Active deals: As of March 31, 2013, the number of active deals in North America increased to nearly 40,000, compared with nearly 37,000 at the end of the fourth quarter 2012.

  • Active customers: Active customers, or customers that have purchased a Groupon within the last twelve months, grew 13% year-over-year, to 41.7 million as of March 31, 2013, comprising 18.2 million in North America, and 23.5 million in International.

  • Customer spend: Trailing twelve month billings per average active customer decreased to $138 from $144 in the fourth quarter 2012, related primarily to seasonal strength in the fourth quarter holiday period.

  • Mobile: In March 2013, 45% of North American transactions were completed on mobile devices, compared with nearly 30% in March 2012. In the first quarter 2013, more than 7 million people downloaded Groupon mobile apps worldwide.

  • Marketplace: The rollout of Groupon's marketplace ("Pull") continued to gain momentum, as email accounted for less than 45% of North American transactions in the first quarter 2013.

Outlook

Groupon anticipates incremental investments of between $15 million and $30 million in customer incentives and marketing in the second quarter 2013. As a result, for the second quarter 2013, revenue is expected to be between $575 million and $625 million, and operating income excluding stock compensation and acquisition-related expenses is expected to be between $20 million and $40 million. Stock compensation is expected to be approximately $30 million, and tax expense is expected to be approximately $25 million. This outlook assumes no acquisitions or investments, or material changes in foreign exchange rates.

Groupon reaffirms its guidance that full year 2013 GAAP operating income will exceed $100 million.

Conference Call

A conference call will be webcast live today at 4:00 p.m. CT / 5:00 p.m. ET, and will be available on Groupon's investor relations website at http://investor.groupon.com. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP), we have provided the following non-GAAP financial measures in this release and the accompanying tables: foreign exchange rate neutral operating results, operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net, Adjusted EBITDA, earnings per share excluding stock-based compensation and acquisition-related expense (benefit), net, and free cash flow. These non-GAAP financial measures are presented to aid investors in better understanding Groupon's performance and to facilitate comparisons to many of our peers who present similar measures. However, these measures are not intended to be a substitute for those reported in accordance with U.S. GAAP. These measures may be different from non-GAAP financial measures used by other companies, even when similar terms are used to identify such measures. For reconciliations of these measures to the most applicable financial measures under U.S. GAAP, see "Non-GAAP Reconciliation Schedules" and "Supplemental Financial Information and Business Metrics" included in the tables accompanying this release.

We exclude the following items from one or more of our non-GAAP financial measures:

Stock-based compensation. We exclude stock-based compensation because it is primarily non-cash in nature and we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and liquidity.

Acquisition-related expense (benefit), net. Acquisition-related expense (benefit), net represents the change in the fair value of contingent consideration arrangements related to business combinations. The composition of our contingent consideration arrangements and the impact of those arrangements on our operating results vary over time based on a number of factors, including the terms of our business combinations and the timing of those transactions. We exclude acquisition-related expense (benefit), net because we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and facilitate comparisons to our historical operating results.

Depreciation and amortization. We exclude depreciation and amortization because it is non-cash in nature and we believe that non-GAAP financial measures excluding these items provide meaningful supplemental information about our operating performance and liquidity.

Descriptions of the non-GAAP financial measures included in this release and the accompanying tables are as follows:

Foreign exchange rate neutral operating results show our current period operating results as if foreign currency exchange rates had remained the same as those in effect in the comparable period.

Operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net is a non-GAAP financial measure that comprises the consolidated total of the segment operating income (loss) of our two segments, North America and International. We use consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net to allocate resources and evaluate performance internally.

Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, and acquisition-related expense (benefit), net. Adjusted EBITDA is similar to Operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net, except Adjusted EBITDA also excludes depreciation and amortization. Our definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. We believe that Adjusted EBITDA is a meaningful measure for evaluating our operating performance and liquidity.

Earnings per share excluding stock-based compensation and acquisition-related expense (benefit), net is a non-GAAP financial measure that adjusts our earnings (loss) per share to exclude the impact of stock-based compensation expense, acquisition-related expense (benefit), net and the income tax effect of those items. We believe that this non-GAAP financial measure provides meaningful supplemental information for evaluating our operating performance.

Free cash flow is a non-GAAP financial measure that comprises net cash provided by operating activities less purchases of property and equipment and capitalized software. We use free cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe that it typically represents a more useful measure of cash flows because purchases of fixed assets, software developed for internal use and website development costs are necessary components of our ongoing operations. Free cash flow is not intended to represent the total increase or decrease in Groupon's cash balance for the applicable period.

Note on Forward-Looking Statements

The statements contained in this release that refer to plans and expectations for the next quarter or the future are forward-looking statements that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The risks and uncertainties that could cause our results to differ materially from those included in the forward-looking statements include, but are not limited to, volatility in our revenue and operating results; risks related to our business strategy; responding to changes in the market; effectively dealing with challenges arising from our international operations; retaining existing customers and adding new customers; retaining existing merchant partners and adding new merchant partners; incurring expenses as we expand our business; competing against competitors with more financial resources than us; maintaining favorable terms with our business partners; maintaining a strong brand; managing inventory and order fulfillment; integrating our technology platforms; managing refund risks; retaining our executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining our information technology infrastructure; security breaches; protecting our intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant partner fraud; global economic uncertainty; compliance with rules and regulations associated with being a public company; and our ability to raise capital if necessary. We urge you to refer to the factors included under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting the company's Investor Relations web site at http://investor.groupon.com or the SEC's web site at www.sec.gov. Groupon's actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance.

You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon's expectations as of May 8, 2013. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in its expectations.

Groupon encourages investors to use its investor relations website as a way of easily finding information about the company. Groupon promptly makes available on this website, free of charge, the reports that the company files or furnishes with the SEC, corporate governance information (including Groupon's Global Code of Conduct), and select press releases and social media postings.

About Groupon

Groupon (NAS: GRPN) is a global leader in local commerce, making it easy for people around the world to search and discover great businesses at unbeatable prices. Groupon is reinventing the traditional small business world by providing merchants with a suite of products and services, including customizable deals, payments processing capabilities and point-of-sale solutions to help them attract more customers and run their operations more effectively. By leveraging the company's global relationships and scale, Groupon offers consumers incredible deals on the best stuff to eat, see, do, and buy in 48 countries. With Groupon, shoppers discover the best a city has to offer with Groupon Local, enjoy vacations with GrouponGetaways, and find a curated selection of electronics, fashion, home furnishings and more with Groupon Goods. To subscribe to Groupon emails, visit www.Groupon.com. To learn more about the company's merchant solutions and how to work with Groupon, visit www.GrouponWorks.com.

Groupon, Inc.

Summary Consolidated and Segment Results

(in thousands, except share and per share amounts)

(unaudited)

Three Months Ended
March 31,

Y/Y %

Growth

2013

2012

Y/Y %
Growth

FX Effect(2)

excluding
FX(2)

Gross Billings (1)

North America

$

681,319

$

553,557

23.1

%

$

(59

)

23.1

%

International

726,450

801,243

(9.3

)

%

(12,460

)

(7.8

)

%

Consolidated gross billings

$

1,407,769

$

1,354,800

3.9

%

$

(12,519

)

4.8

%

Revenue

North America

$

339,554

$

238,565

42.3

%

$

(27

)

42.3

%

International

261,848

320,718

(18.4

)

%

(4,540

)

(16.9

)

%

Consolidated revenue

$

601,402

$

559,283

7.5

%

$

(4,567

)

8.3

%

Income from operations

$

21,178

$

39,639

(46.6

)

%

$

2,377

(52.6

)

%

Net loss attributable to common stockholders

$

(3,992

)

$

(11,695

)

65.9

%

$

2,614

43.5

%

Net loss per share

Basic

$

(0.01

)

$

(0.02

)

Diluted

$

(0.01

)

$

(0.02

)

Weighted average basic shares outstanding

658,800,417

644,097,375

Weighted average diluted shares outstanding

658,800,417

644,097,375

(1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.

(2) Represents change in financial measures that would have resulted had average exchange rates in the reporting period been the same as those in effect during the three months ended March 31, 2012.

Groupon, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended

March 31,

2013

2012

Operating activities

Net loss

$

(3,242

)

$

(3,593

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

20,700

11,716

Stock-based compensation

29,907

28,003

Deferred income taxes

(258

)

(876

)

Excess tax benefits on stock-based compensation

(832

)

(2,881

)

Loss on equity method investments

19

5,128

Acquisition-related expense (benefit), net

68

(52

)

Change in assets and liabilities, net of acquisitions:

Restricted cash

2,523

(1,357

)

Accounts receivable

(7,684

)

(11,878

)

Prepaid expenses and other current assets

12,527

(4,121

)

Accounts payable

(19,606

)

(1,821

)

Accrued merchant and supplier payables

(39,417

)

46,000

Accrued expenses and other current liabilities

13,302

13,420

Other, net

753

6,026

Net cash provided by operating activities

8,760

83,714

Net cash used in investing activities

(30,679

)

(46,444

)

Net cash used in financing activities

(9,342

)

(8,275

)

Effect of exchange rate changes on cash and cash equivalents

(12,378

)

9,059

Net (decrease) increase in cash and cash equivalents

(43,639

)

38,054

Cash and cash equivalents, beginning of period

1,209,289

1,122,935

Cash and cash equivalents, end of period

$

1,165,650

$

1,160,989

Groupon, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

Three Months Ended March 31,

2013

2012

Revenue:

Third party and other

$

439,108

$

540,053

Direct

162,294

19,230

Total revenue

601,402

559,283

Cost of revenue:

Third party and other

70,016

102,629

Direct

152,377

16,869

Total cost of revenue

222,393

119,498

Gross Profit

379,009

439,785

Operating expenses:

Marketing

49,557

116,615

Selling, general and administrative

308,206

283,583

Acquisition-related expense (benefit), net

68

(52

)

Total operating expenses

357,831

400,146

Income from operations

21,178

39,639

Interest and other expense, net

(5,064

)

(3,539

)

Loss on equity method investments

(19

)

(5,128

)

Income before provision for income taxes