Difficulties at Groupon Inc. Continue As It Reports a Net Loss of $38 Million

As a result of increased operating expenses, Groupon (NASDAQ: GRPN  ) reported a loss of $38 million, or $0.06 per share, in the first quarter of 2014, well above the $4 million loss seen through the first three months of 2013.

Total revenue at Groupon rose by 26% from $601 million to $758 million. This was entirely attributable to its direct revenue -- the products it sells directly to consumers -- which more than doubled, from $163 million to $331 million. Its third-party revenue actually fell by $13 million, or 3%, to $426 million.

"Our marketplace continued to gain traction and growth in our mobile business accelerated, with more than 10 million app downloads this quarter and mobile transactions reaching 54% in March," said Groupon CEO Eric Lefkofsky in the earnings announcement.

However, Groupon had almost identical growth in the cost of its revenue, which grew by $150 million, or 67%, to stand at $371 million. As a result, its gross profit rose by only $7 million, or 2%, to stand at $386 million.

In addition, the discount retailer saw a significant increase in its marketing expenses, which grew from $50 million in the first quarter of 2013 to $79 million in the most recent quarter. In addition, its selling, general, and administrative expenses rose by nearly $17 million, or almost 5.5% to $325 million.

In total, the operating expenses at Groupon rose by $48 million relative to the first quarter of 2013, which outpaced its gross profit growth. As a result, it saw an operating loss of $20 million in the first quarter of this year, compared with a profit of $22 million over the same time period last year.

Groupon did further clarify its expectations for 2014, as it said it expects to see its adjusted EBITDA exceed $300 million. It previously said it thought its adjusted EBITDA would be slightly above the $287 million seen in 2013. Its adjusted EBITDA stood at $40 million in the first quarter of 2014, versus $72 million in the first quarter of 2013, a decline of nearly 45%.

"We're on track with our plans in 2014 to invest in the growth of Local, improve our Goods margins, and drive profitability in our International operations," Lefkofsky concluded, in his prepared remarks. "As a result, we have further confidence in our results for the back half of the year and have increased our full-year outlook." 

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Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

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9/2/2015 3:59 PM
GRPN $4.35 Up +0.06 +1.40%
Groupon, Inc. CAPS Rating: *