Groupon Reports Quarterly Loss, But Beats Revenue Expectations in Its First Earnings Release

Groupon’s revenue surged 194 percent year over year to $506.5 million to beat analysts expectations; however, the company was not able to trim expenses enough to turn a profit.

In after-hours trading, the company’s shares were down 10 percent, or $2.49, to $22.09.

Still, for its first earnings report since going public, Groupon was able to report a number of strong operating financials. (See notes from the company’s first earnings call below.)

Full-year revenues increased 419 percent to $1.6 billion, compared to $312.9 million in 2010. The company also drastically cut back its losses, reporting a loss of $350.8 million, or 97 cents a share, compared to $456.3 million, or a loss of $1.33 a share.

Analysts had expected the daily deals giant to report quarterly revenue of $475 million, according to Thomson Reuters.

Analysts also expected it to be Groupon’s first profitable quarter in nearly two years, as it slashed marketing expenses ahead of its IPO to become more efficient. Estimates were expecting the company to report a profit of three cents per share.

The company was not able to meet those expectations and reported a net loss of 8 cents a share during the fourth quarter.

Other notable highlights Groupon provided:

  • Trailing 12-month gross billings per average active customer, which is a proxy for the total annualized spend per average customer, increased to $188 in Q4 from $160 in Q4 2010.
  •  Groupon’s active customer base worldwide hit 33 million, increasing 275 percent year over year and more than 20 percent quarter over quarter. Active customers are defined as those who bought a Groupon in the past year.
  • More than 26 million people have downloaded the Groupon mobile app on their smartphones worldwide.

In November, Groupon raised $700 million in an initial public offering.

At that size, it was the largest IPO by a U.S. Internet company since Google raised $1.7 billion in 2004, which was more recently beat by Zynga, which sold $1 billion in a December stock offering.

The company’s closest competitor, LivingSocial, lost $558 million on revenues of $245 million. The results of the privately held company were disclosed as part of Amazon’s fourth quarter results. Amazon owns a 31 percent stake in the second-largest daily deals company.

In the company’s first quarter guidance, the company is forecasting revenue of $510 million to $550 million and income from operations of $15 to $35 million, compared to a loss of $117.1 million in the same period 2011.

Notes from the conference call:

  • CEO Andrew Mason jumps on the call, his first for the company!
  • He mentions that they’ve made several tech acquisitions and that the company now has four times the technology headcount as part of its new office in Palo Alto that it opened in fourth quarter. I featured the new office in a story today.
  • The strategy remains to invest in the future, he says. The Groupon of five years from now will require investments in technology and innovations. Despite rapid growth, he estimates that they participate in less than 1 percent of all local transactions.
  • He’s definitely talking up how the company is becoming a technology-driven company. This could conceivably build a bigger barrier to entry in the market.
  • The call is now being handed over to CFO Jason Child to go over all the quarter’s financials.
  • He says a majority of the marketing spend is continuing to go toward increasing its subscriber base, especially in new markets.
  • Q&A is now starting.
  • Mason gets the first question about how fewer competitors is affecting his decision to spend money on marketing. He says: “Historically, we haven’t made any decisions based on the behavior or [market]share of our competitors, so while we are encouraged by developments in the marketplace, we continue to operate against our own roadmap rather than the behaviors of the competitors.”
  • A question about the company’s $40 million loss in international markets: Comparatively, Groupon made $35 million in Q4 in the U.S., its oldest market. “That’s the model for how we want all the markets to look,” Child said. That’s down from the previous quarter, and Child says he expects to make progress over the next few quarters in all regions and countries.
  • Mason concludes the call by saying: “Thanks, guys, this was a lot of fun, and I look forward to many more of these.”

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik