After Rebuke, Groupon Works to Restore Confidence

Earlier this year, newly listed daily deals provider Groupon faced rebuke from accountants. The company had to revise their previous quarter’s performance because their auditors found significant issues, material weaknesses and missing internal controls in their financial statements. To repair the damage their reputation, Groupon has worked hard and for the past quarter delivered a strong performance that surpassed market projections. They have also been shuffling their senior management positions and have put in place several more experienced leaders.

Groupon’s Financials
Groupon’s (Nasdaq:GRPN) Q1 revenues grew 89% over the year to $559 million, ahead of the Street’s target of $530.5 million. EPS for the quarter of $0.02 was also ahead of the market’s projected earnings of $0.01 per share. They were able to deliver a profitable quarter by controlling marketing expenses. They added the same number of customers as they did during the fourth quarter of 2011, but spent 25% less on marketing initiatives. In fact, during the quarter, marketing expenses fell 49% over the year to $116.6 million.

Revenues grew in both domestic and international markets. U.S. revenues of $238.6 million grew 75% over the year and 33% over the quarter, recording the biggest increase ever. International revenues grew 101.8% over the year to $320.7 million. The company now has more than 36.9 million active customers accessing deals offered by more than 100,000 unique merchants.

Groupon projects current quarter revenues to come in at $550 million-$590 million with an income of $25 million-$45 million. The Street was projecting revenues of $558.7 million with an income of $44.1 million for the quarter.

Groupon’s Mobile Growth
Groupon is focusing on enhancing their mobile offerings. Last quarter, mobile devices accounted for 30% of transactions completed on Groupon in the U.S.  A year ago, mobile accounted for a quarter of the transactions. Their analysis has shown that mobile consumers also end up spending at least 50% more than non-mobile users. To respond to the increased use of mobiles, Groupon will launch a new mobile application that will be released in the next few months. They did not divulge details about the new platform.

Recently, they announced plans to acquire a mobile social recommendation app, Ditto.me. Ditto’s solutions lets users check out new places, restaurants, and movies with their friends. Although Ditto is primarily an iPhone app, it goes beyond check-in by letting users share what they plan to do so that they can do the same thing with their friends. The app is also known for its well-designed user interface. Following the acquisition, Ditto’s services will be shut down and the team will merge with Groupon to work on Groupon’s mobile offerings.

Groupon Improves Offerings
Groupon has managed to improve the domestic revenues using a new technology called SmartDeals. The SmartDeals solution offers more customized deals to Groupon consumers by given them a collection of deals that match their needs. The solution was implemented in North America this quarter and will be gradually rolled out to international markets soon.

After a successful test market run in Philadelphia, Groupon released Groupon Rewards, which lets merchants offer exclusive Groupons to repeat customers based on the credit card they have on file in their Groupon account. Groupon offers to their merchants analytics to help them ascertain the profitability of their campaigns. Since the program’s launch, 30% of merchants eligible for Rewards have signed up.

Earlier last quarter, Groupon also released a free online booking service, Groupon Scheduler, for small and medium businesses. Groupon Scheduler is based on the technology they acquired through the OpenCal merger. The service is an online scheduling solution that is available to all SMBs in the U.S. and Canada. Groupon’s merchants will now be able to accept online bookings irrespective of the source of the transaction – whether the consumer came through a Groupon deal or not. The service comes with other tools such as a business dashboard which show real-time view on total appointments, new customers, and percentage of bookable time filled. It can also integrate with the merchant’s Groupon offerings so that the merchant can track Groupon redemptions.

Groupon’s stock is trading at $12.58 with a market capitalization of $8.32 billion. The stock  touched a high of $31.14 shortly after listing six months ago.