Groupon's Gross Billings Decline on a Sequential Basis For the First Time

After missing Q2 revenue estimates ($568 million vs. $573 million expected via ThomsonReuters), Groupon's stock crashed 27% to $5.51 today, which is a new all-time low. Groupon is finally profitable though on a GAAP and non-GAAP basis. From Groupon's 8K filing and earnings slides, operating and net income rose to $46.5 million and $28.4 million, respectively, which included stock based compensation and acquisition related costs (GAAP accounting). Excluding these expenses, operating and net income rose to $71.9 million and $53.8 million, respectively (Non-GAAP).

I put up Statista's infographic on Groupon's earnings below, which included charts of revenue vs. marketing expenses, operating income vs. net income, its stock price, and the most interesting chart of all, gross billings. The chart showed that gross billings declined for the first time on a sequential basis ($1.29 billion in Q2 vs. $1.35 billion in Q1, down 4.4%). They blamed the fall on foreign exchange losses. From the 8K filing:

"Gross billings, which reflects the total amount collected from customers, excluding any applicable taxes and net of estimated refunds, increased 38% year-over-year to $1.29 billion in the second quarter 2012, compared with $929.2 million in the second quarter 2011. Excluding the $75.1 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, gross billings growth would have been 47% compared with second quarter 2011."

Another thing you should know is the year-over-year growth in "Gross Billings" has been falling every quarter since Q1 of 2011 (even when excluding FX). This makes sense given the company's exponential growth, but if the sequential (quarter-to-quarter) decline becomes a new trend, it would get even worse. This data is already being priced into the stock. $GRPN is now down 82% from its all time high of 31 smackers (the IPO pop).

source: Groupon 8K Filing

Groupon now has so much direct competition (Google Offers, Living Social etc.) that they need to reinvent themselves and get creative again. I see a company called Belly, which is owned by the Groupon founders' venture capital firm Lightbank, competing in this space. The Belly card (or smartphone barcode) lets people earn points and rewards at the places they shop at fast, and even uses their network to promote local deals (or a free pizza for example) to card holders via barcodes in emails. I like it. Groupon has $1.2 billion of cash and no long-term debt, according to the press release. Update: I forgot to mention that Morningstar analyst Rick Summer thought Groupon was worth $8 per share on Fox Business on 11/6/2011. Nice call.

Source: Statista
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