5 Things Groupon's Management Wants You to Know

Five of the most important quotes from Groupon's most recent earnings call.

Aug 29, 2014 at 10:00AM

It's been a rough ride for Groupon (NASDAQ:GRPN) shareholders since the company went public nearly three years ago -- significant declines have been all too common. Earlier this month, for example, Groupon shares plunged, losing almost one-fifth of their value, after the local deals giant reported a quarter that fell short of analysts' expectations.

Yet, Groupon's management remains optimistic about what it's building. Though Groupon is still not consistently profitable, it is seeing growth.

Below are five of the most important quotes from Groupon's most recent earnings call. Collectively, these quotes highlight Groupon's long-term goals and the recent changes it has made to its core business.

Groupon is a mobile-first company
Other semi-recent tech IPOs, notably Facebook, once faced doubts about their ability to adapt their businesses models to a world increasingly centered around mobile computing. Groupon never faced quite as much skepticism in this area, but regardless, it's important to note that the company's mobile presence is growing nicely. During the company's recent earnings call, CEO Eric Lefkofsky emphasized the company's mobile reach. 

Nearly 92 million people have now downloaded [the Groupon] app...Mobile remains over half of our business...Mobile mix, as measured by transactions, continued to increase [last quarter], reaching yet another all-time high...We are no longer becoming a...mobile business, we...are a mobile business.

Unlike other firms that depend on advertising revenue, Groupon's business should not be dampened by the shift to mobile. In fact, as more consumers download the app, Groupon may be poised to offer better deals based on, among other things, location data, and sell more often to regular app users.

Revenue continues to grow
On a GAAP basis, Groupon has not been consistently profitable anytime in its history as a public company. Even using adjusted numbers (excluding stock-based compensation) Groupon is barely turning a profit.

Investors, then, buying Groupon are likely doing so more for its long-term potential rather than a steady, established stream of income. In that respect, Groupon continues to experience revenue growth, lending credence to such an investment thesis. During the most recent earnings call, Lefkofsky summarized Groupon's recent growth.

[Last quarter] gross billings increased 29% to $1.82 billion, and revenue increased 23% to $752 million.

Is Groupon becoming a Yelp competitor?
During the earnings call, Lefkofsky talked at length about "Pages" -- a recent initiative to improve the Groupon website.

Pages are...mini sites that live on Groupon on the web...These pages...allow merchants to access our large community of people looking to buy...they have two primary purposes: One is [that] merchants can put up the kind of information that consumers want to see...[the second is that] our customers [can] leave tips.

Groupon Pages (see an example here) bare an uncanny resemblance to Yelp's local listings. However, Groupon's management insists that Pages are not intended to be used as a rating or review platform, but rather, to drive further engagement. Tips left by customers ("the service was really good") can increase the value of Groupon's local offerings, creating a sort of stickiness among Groupon's userbase.

Establishing a commerce platform
Arguably, the term "daily deals" no longer applies to Groupon, as the company has, over the last few years, moved away from the daily email blasts it was built on. Now, Groupon serves as platform for local, featured deals that may run for several days or longer. During the question and answer portion of the earnings call, Lefkofsky summarized Groupon's overarching ambitions.

We're trying to go one step further and actually connect and build a platform, and really get not just 100,000 merchants, but hopefully, one day a million merchants or two million merchants or more that are connected to Groupon all the time.

The growing popularity of its mobile app, the addition of the aforementioned Pages and other measures, are slowly shifting Groupon's business from one based around emailed coupons to a platform centered around connecting local merchants to customers. Investors interested in Groupon should view the company's potential in that context.

Groupon's long-term goals
Lastly, and perhaps most importantly, Lefkofsky offered a clear definition of Groupon's goals. 

[Groupon] define[s] long-term success as both gross billings and gross profit growing at least 20% annually over the next five years.

If Groupon can execute on both of these goals, it could create significant shareholder value. However, such targets may be overly optimistic -- although its gross billings (up 29% on an annual basis last quarter) are growing, it simply isn't generating much profit -- gross profit increased less than 2% last quarter on an annual basis.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and Yelp. The Motley Fool owns shares of Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information