Groupon Earnings Reaction — a Groupon for Its Stockholders

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Groupon Inc. (NASDAQ: GRPN) has released its second-quarter earnings. The daily deals and promotional site reported earnings of $0.01 in earnings per share on an adjusted basis, and revenues grew by 23% to $751.6 million. As far as the Thomson Reuters consensus estimates, they were $0.01 in earnings per share (EPS) and $761.8 million in revenues.

Update: Groupon’s disappointing report prompted analyst downgrades, as well as concerns about how it counts users and how much it paid to buy back shares.

At the end of the quarter, Groupon had $868.1 million in cash and cash equivalents. During the second quarter, Groupon said that it repurchased 17,228,792 shares of its common shares at an average price of $6.15 per share. This comes to an aggregate purchase price of $106 million spent.

Groupon said that it has entered into a credit agreement with J.P. Morgan, although it said it has no plans to draw the credit facility. This was a three-year, $250 million revolving credit facility aimed to provide additional balance sheet flexibility. Other key metrics were as follows:

  • Global units rose by 79% year-over-year to 83 million in the second quarter.
  • Active customers (who purchased a voucher/product within the last twelve months) rose by 25% from a year ago to 53.2 million as of June 30, 2014.

Groupon gave guidance for its third quarter to generate revenue of between $720 million and $770 million and non-GAAP EPS of between $0.00 and $0.02. The Thomson Reuters estimates are $0.03 EPS and $760.6 million in revenues.

24/7 Wall St. warned readers ahead of the report that Groupon also refers to its gross billings on top of just revenue. Gross billings in the second quarter were sequentially flat a $1.82 billion, although this was up 29% from a year ago.

Groupon shares closed up five cents at $7.07 on Tuesday, and its 52-week range is $5.18 to $12.76. Unfortunately, Groupon shares were down almost 14% at $6.06, a drop of almost $1 in total, shortly after the close of trading. The Thomson Reuters consensus analyst price target before the earnings report was $8.58.

As of now, it looks like the few analysts who were going to try to hang on to higher numbers are going to have to temper expectations ahead.

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