Groupon, Inc.
Nov 8, 2012
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Groupon Announces Third Quarter 2012 Results

CHICAGO--(BUSINESS WIRE)-- Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter ended September 30, 2012.

Revenue increased 32% year-over-year to $568.6 million in the third quarter 2012, compared with $430.2 million in the third quarter 2011. Excluding the $26.0 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, revenue growth was 38% compared with third quarter 2011.

Gross billings, which reflects the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds, increased 5% year-over-year to $1.22 billion in the third quarter 2012, compared with $1.16 billion in the third quarter 2011. Excluding the $61.7 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, gross billings growth was 11% compared with third quarter 2011.

Operating income was $25.4 million in the third quarter 2012, which included stock-based compensation and acquisition-related expenses of $25.1 million. This compares with a loss from operations of $0.2 million in the third quarter 2011, which included net positive stock-based compensation and acquisition-related expenses of $1.5 million. Year-over-year changes in foreign exchange rates throughout the quarter had a $2.8 million favorable impact on operating income. Revenue and operating income in the third quarter 2012 included a one-time increase of $18.5 million related to breakage, or income related to unredeemed Groupons internationally, resulting from the clarification of a tax ruling in Germany.

"Our solid performance in North America was offset by continued challenges in Europe," said Andrew Mason, CEO of Groupon. "Groupon Goods has evolved into a second major category that our customers clearly love. With deals on everything from designer sunglasses to big-screen televisions to most-wanted toys, we think it will be a great gifting destination this holiday season."

Operating cash flow decreased 35% year-over-year to $42.1 million, compared with $64.4 million in the third quarter 2011. For the trailing twelve months ended September 30, 2012, operating cash flow was $370.2 million. Free cash flow, a non-GAAP financial measure calculated as operating cash flow less capital expenditures, was $26.1 million for the third quarter 2012, bringing free cash flow for the trailing twelve months ended September 30, 2012 to $300.4 million. This reflects an increase of 123% year-over-year compared to free cash flow in the trailing twelve months ended September 30, 2011 of $134.9 million. At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents and no long-term debt.

Third quarter 2012 net loss attributable to common stockholders improved by $51.3 million year-over-year, to $3.0 million, or $0.00 per share, reflecting stock-based compensation and acquisition-related expenses of $25.1 million and a diluted share count of 653.2 million. Net loss attributable to common stockholders was $54.2 million, or a loss per share of $0.18 in the third quarter 2011, including net positive stock-based compensation and acquisition-related expenses of $1.5 million.

Groupon, Inc.
Summary Consolidated and Segment Results
(dollars in thousands, except share and per share data)
(unaudited)
               

Three Months Ended

 

Y/Y %
Growth

Nine Months Ended

 

Y/Y %
Growth

September 30,

Y/Y %

excluding

September 30,

Y/Y %

excluding

2011 2012

Growth

FX (1)

2011 2012

Growth

FX (1)

Revenue
North America $ 161,525 $ 291,603 80.5 % 80.7 % $ 455,342 $ 790,349 73.6 % 73.8 %
International   268,636     276,949   3.1 % 12.7 %   662,924     905,821 36.6 % 46.9 %
Consolidated revenue $ 430,161   $ 568,552   32.2 % 38.2 % $ 1,118,266   $ 1,696,170 51.7 % 57.9 %
 
Operating (loss) income $ (239 ) $ 25,438 N/A N/A $ (218,414 ) $ 111,562 N/A N/A
 
Net (loss) income attributable to common stockholders $ (54,229 ) $ (2,979 ) 94.5 % 87.1 % $ (308,115 ) $ 13,712 N/A N/A
 
Net (loss) earnings per share
Basic $ (0.18 ) $ (0.00 ) $ (1.01 ) $ 0.02
Diluted $ (0.18 ) $ (0.00 ) $ (1.01 ) $ 0.02
 
Weighted average basic shares outstanding 307,605,060 653,223,610 305,288,502 648,021,943
Weighted average diluted shares outstanding 307,605,060 653,223,610 305,288,502 663,557,250

(1) Represents change in financial measures that would have resulted had average exchange rates in the reported period been the same as those in effect in the three and nine months ended September 30, 2011.

Highlights

Fourth Quarter 2012 Outlook

Revenue for the fourth quarter 2012 is expected to be between $625 million and $675 million, an increase of between 27% and 37% compared with the fourth quarter 2011.

Income from operations for the fourth quarter 2012 is expected to be between $0 million and $20 million, compared with a loss from operations of $15.0 million in the fourth quarter 2011. This outlook includes approximately $30 million of stock-based compensation. The outlook further assumes no acquisitions or investments, or material changes in foreign exchange rates.

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 Measure

In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided free cash flow, which is a non-GAAP financial measure, to aid investors in better understanding Groupon's performance. We have provided free cash flow because, although it is similar to cash flow from operations, we believe it typically will present a measure of cash flows more aligned with an analysis of ongoing business operations as purchases of fixed assets, software developed for internal use and website development costs are a necessary component of ongoing operations. However, free cash flow is not intended to be a substitute for cash flows from operations and is not intended to represent the total increase or decrease in Groupon's cash balance for the applicable period. For a reconciliation of free cash flow to cash flow from operations, see ''Non-GAAP Reconciliation Schedule'' included in this release.

Note on Forward Looking Statements

The statements 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 results to differ materially from those included in the forward-looking statements include, but are not limited to, Groupon's ability to continue to expand the business and continue revenue growth; risks related to Groupon's business strategy; Groupon's ability to manage the growth of the organization; responding to changes in the markets in which Groupon competes for business; retaining existing merchant partners and adding new merchant partners; competing against smaller competitors and competitors with more financial resources; developing new product and service offerings that are appealing to customers; maintaining a strong brand; effectively dealing with challenges arising from Groupon's international operations; integrating Groupon's technology platforms; managing refund risks; retaining the executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining Groupon's information technology infrastructure; security breaches; protecting Groupon's 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 Groupon's ability to raise capital if necessary. Groupon urges 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, 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 November 8, 2012. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this earnings 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.

Groupon, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
         

Three Months Ended
September 30,

Nine Months Ended
September 30,

2011 2012 2011 2012
Operating activities
Net (loss) income $ (14,416 ) $ (940 ) $ (238,083 ) $ 29,016
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 7,058 15,310 22,754 39,836
Stock-based compensation 3,340 22,619 60,922 77,706
Deferred income taxes 2,839 (3,389 ) 602 9,608
Excess tax benefits on stock-based compensation (7,791 )