Groupon Misses Earnings Estimates (Liveblog)

Groupon just announced its first earnings since its IPO in November. For the fourth quarter of 2011, it reported revenue of $506.5 million, beating analyst estimates of $473 million. It’s also profitable, with net income of $15 million.

The company’s numbers are up almost across-the-board compared to the same period last year — revenue is up 194 percent, income is up from a $336.1 million loss. However, Groupon came up short on earnings per share, coming in at negative $0.02, rather than the positive $0.03 EPS that analysts were expecting. (That number includes a $0.07 cent tax from international operations.) As result, at 4:20pm Eastern, Groupon was down 11.3 percent in after-hours trading.

In its guidance for the first quarter of 2012, Groupon is projecting revenue between $510 million and $550 million, and operating income between $15 million and $35 million.

The earnings call starts at 4:30pm Eastern — I’m liveblogging it below.

1:35pm: CEO Andrew Mason says it was “phenomenal year” for Groupon. Revenue was up 420 percent. The fourth quarter was also the first profitable quarter since Groupon’s international expansion. The company has quadrupled technical headcount and opened a tech-focused office in Palo Alto.

1:38pm: Mason says earnings reflect a validation of Groupon’s ideas. Rapid growth reflects the size of the market. “We believe we are on the cusp of a sea change” in behavior. “We’re about to see what technology can do for local commerce.” He also says Groupon is finding early success with deals personalized to user demographics and other data, with higher engagement and satisfaction rates.

1:42pm: Now they’re going over the finances in detail, which we covered in a separate post. Among other things, they talk about the success of Groupon’s Christmas-themed Grouponicus promotions and says there will be other “occasion-based” promotions. A lot of discussion about marketing spend. Company says it will continue to “invest aggressively” in technology and staffing.

1:53pm: Full-year capital expenditures were up $43.8 million. The increase reflects more technology spending.

1:55pm: Question and answer session starts. How have changes to competitive landscape affected investment strategy? Mason says historically that’s not how Groupon has worked, even though it’s “encouraged” by developments in the market.

1:58pm: More information on the high tax rate? CFO Jason Child said 3 cents of the tax was related to the establishment of the international headquarters in Switzerland. This gets pretty complicated, but it sounds like a lot of this is related to the fact that Groupon is seeing dramatically difference results in different countries, where it pays local tax rates. All regions and all countries should be profitable “in the next year or two.”

2:01pm: Question about hiring. Mason says many newer projects, like Groupon Rewards, are more technologically complex. “It’s pretty remarkable, magical stuff that we think is going to create a more comprehensive marketing suite for our merchant partners but more value for consumers but it obviously takes deeper investment.”

2:03pm: What is the impact of personalization of deals? Right now, personalization that we’re doing is around a user’s location. “We’re making incremental improvements every quarter.” This quarter or in Q2 there will be a thumbs up, thumbs down mechanism to rate deals, as well as a personalization wizard that will collect “the fundamental information we need to improve a user’s experience.”

2:05pm: Any metrics or data points about Groupon Now? Customers who have purchased a Now deal are better customers who spend more in general on Groupon. “Everything’s on-track.” Plans to roll out to additional markets in US and to UK later this quarter or in Q2.

2:07pm: Mason says there’s a lot of ways Groupon marketing is getting smarter. For example, it’s investing more heavily in transactional marketing, which is supposed to drive actual purchases, not just subscriptions.

2:09pm: Child talks about guidance, with caveats about uncertainty in seasonability and broader economic trends.

2:10pm: What are merchant satisfaction levels as measured by repeat rates? Mason notes that Groupon previously said that more than half of merchants featured on Groupon were featured in the past, and he says the number of repeat merchants has only gone up since then. And has reduced marketing spend affected growth? Mason says it hasn’t.

2:14pm: In terms of tracking consumer engagement, Mason touts high engagement rates for “how was your experience?” emails. He also says Groupon surveys its customers and looks at spending behavior broken up by cohorts (i.e., when they joined the site).

2:18pm: What kind of results do you see from new merchant products? Mason said it’s too early to measure the affect on merchant frequency, since most merchants only list Groupons a few times a year at most. However, merchant satisfaction is up, which suggests that there will be increased engagement in the long-term.

2:21pm: 31 percent of revenue going to marketing is not something that’s going to hold steady. After all, that percentage used to be more than 100 percent. Whether it will get down to 5 or 10 percent, “it’s going to take a little while.”

2:23pm: Another question about reception for newer products like Groupon Getaways. “We feel great about how well the assets that we’ve acquired over the last three years of building a local commerce business have translated into these new spaces.” Mason says he was “shocked” by the high percentage of Groupon Getaways purchased from mobile devices during the first week — he attributes that to the trust that Groupon has built.

2:25pm: Can Groupon offer more info about how new products fit into first quarter guidance? Child says we can expect to see the Getaways expand to more features and more partners. “Assume that we’re very happy with the progress.” Groupon has to make an investment whenever it launches a product, but over time, that investment goes down. Child declines to say how that will affect first quarter numbers.

2:28pm: Mason: “Thanks guys, this was a lot of fun. Look forward to many more of these.”