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Thursday, November 8, 2012

Groupon (GRPN) reported earnings on 8 Nov 2012

 Ticker: GRPN

Groupon sounded a discouraging note for investors Thursday with a quarterly report indicating a narrower loss but slower revenue growth for the daily deals website. Shares tumbled 16% to $3.31 after hours.


Groupon stock plunged 16 percent in after-hours trading after the company's third-quarter earnings missed Wall Street forecasts.

Groupon reported $568.6 million in revenue, below the analyst target of $592 million. It reported a loss of $3 million, or breakeven per share. Excluding stock-option and other costs, it met analysts' forecasts' of 3 cents per share.
Groupon shares hit a new low of $3.30 per share in after-hours trading, continuing a slide.
Among the trouble spots in Groupon's financials:

Cash from operations fell by one-third to $42.1 million from $64.4 million a year ago.
International revenue declined for the first time, slipping to $277 million, down from $308.2 million in the previous quarter.

Gross billings, or the total value of goods and services sold by Groupon before it splits the take with merchants, fell from second-quarter levels. It was the second straight quarter of decline, reflecting increased reliance on lower-priced products and services.

Groupon said that exchange rates were a major culprit. Without those problems, Groupon's revenue would have been $594.6 million, ahead of forecasts, and gross billings would have been higher.
Groupon forecasts revenue between $625 million and $675 million, slightly above Wall Street's average forecast of $634 million. But income from operations is expected to fall to between $0 and $20 million, down from the $25 million operating profit in the third quarter.

Groupon's stock has been falling since March, when it revised financials and warned of accounting problems.
Groupon laid off about 80 people in sales this week, as it starts implementing automation strategies previously laid out by Kal Raman, the company's new senior vice-president for sales and global operations.
The layoffs first were reported by Business Insider's Henry Blodget early Thursday afternoon.

“Groupon announced several months ago it would be using technology to increase productivity through automation,” a spokeswoman says. “We will always aim to optimize business operations wherever opportunities are identified.”

As of June 30, Groupon had about 1,120 sales staff in North America, most of them based in Chicago. Groupon declined to say where the laid-off employees are located.

Groupon has been cutting sales staff for three quarters, from a peak of 5,735 to 5,087 as of Sept. 30. That's down 500 in the past quarter, not including Thursday's cutbacks. Groupon's labor-intensive sales model has been viewed as a negative by many investors.
Mutual funds associated with Fidelity Investments, which owned 12.7 million shares when the company went public, now hold just 1 million shares after dumping 8.5 million in August, according to data from Chicago-based Morningstar Inc. The data only goes through August, when Groupon shares still were trading above $4. The fund did not return calls for comment.

Various T. Rowe Price funds loaded up on Groupon during the third quarter ended Sept. 30, adding 7 million shares, a 40 percent boost. The Baltimore-based fund company has doubled down on Groupon since the IPO a year ago, boosting total holdings to 24.8 million shares. The company did not return calls for comment.

American Funds boosted its holdings 14.6 percent in the third quarter, scooping up 3.8 million shares. The funds, run by Los Angeles-based Capital Group Cos., now hold 30.1 million shares, making it one of the 10 largest investors. The company declined to comment.

With its stock price flagging below $5 per share, and a total market value below $3 billion, Groupon faces several challenges on the stock front. It's a buzzkill for employees who had visions of riches when the stock went public at $20. And stocks below $5 have a harder time attracting mutual funds, said Morningstar analyst Mike Rawson. “It's psychological for employees,” he said. “Some funds have an unofficial rule of thumb not to invest in stocks under $5.”

** day after earnings **

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