Groupon closes up 23% after Q4 report, says it paid nothing for LivingSocial

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Groupon, the daily deals platform that has been restructuring itself and trying to shift into more profitable areas of e-commerce, today reported its Q4 earnings. The company reported sales of $934.9 million but with a net loss of $50.2 million, and a non-GAAP EPS of $0.07. Both are a beat for the company: analysts were expecting revenues of $912.8 million, and non-GAAP earnings per share of -$0.02.

The other key detail to note from today’s earnings report, which covers both Q4 and the full year, is that Groupon acquired longtime rival LivingSocial last quarter for ‘no consideration’ according to its 10-K filing. That is to say, it paid nothing for the company that had raised over $900 million when still in venture-backed startup mode.

Elsewhere, Groupon noted that LivingSocial contributed around $9 million in revenues and $4 million in losses, and that acquisitions in the quarter constituted a net acquisition expense of about $1.3 million — which also includes two investments made in the quarter, CEO Rich Williams said in an interview with TechCrunch. All in all, a strong deal, considering that it has consolidated and taken out a competitor in the market.

All this plus positive guidance for the year ahead have had a good impact: the company’s shares are trading up more than 20 percent at the time of this post.

Groupon also said it added around 5 million customers globally, with 2 million in North America. It now has 31.2 million customers in North America and 52.7 million globally. Around 1 million of its additions were in the form of previous customers of LivingSocial – who are showing “higher attrition” and “lower purchasing frequency” compared to Groupon, in part because LS didn’t have the budget for marketing.

Groupon has been on a long road to trying to fix its business, after once being feted as a hot startup, blasting off in a hot IPO, and then crashing and burning as the reality of the its business set in: that daily deals are not nearly as constant and strong a market as many thought they would be.

Last quarter, the company punctuated its earnings two significant announcements that both point to the ongoing consolidation in that market: Groupon announced yet more closures of global offices where business was costing it too much and not giving enough returns, and it acquired LivingSocial.

Some of this restructuring is having a negative impart in the short term. “Gross billings were impacted by dispositions and country exits in connection with Groupon’s restructuring efforts, partially offset by the addition of LivingSocial. On a same-country, FX-neutral basis, gross billings,” it noted.

Its CEO couched the state of company today as part of its strategy. In a phone interview after the earnings, he told TechCrunch that everything was going to plan after a “challenging” period at the company and that it is on track to downsize to 15 markets by Q2 2017 (at its peak there were nearly 50). Williams also noted that LivingSocial integration is well under way. “We’re pleased with how it is progressing,” he said.

In a statement in the earnings report, Williams also highlighted the strategic course the company is taking.

“In 2016, our concentrated focus on key strategic initiatives provided a strong foundation for Groupon going forward and resulted in a streamlined global operation, a healthier Goods business, improved customer service and strong customer acquisitions after a successful online and offline marketing strategy,” he said in a statement. “We look forward to continuing to invest in the Groupon brand and unlocking the true potential of our business as we make Groupon the daily habit in local commerce.”

Once a huge competitor but more recently, if anything, even more crippled by the daily deals doldrums than Groupon itself, LivingSocial in its life as a startup raised $928 million from a range of backers that included top-shelf VCs as well as Amazon, all of whom essentially wrote off their investments as the startup went through several rounds of restructuring and pivoting.

(One of its divestments, in fact, had been to Groupon, which acquired TicketMonster from it in Korea in a bold Asia play, only to sell it off again just over a year later.)

Full year revenue was $3.14 billion in 2016, compared with $3.12 billion in 2015.
It also provided guidance for 2017 showing some but not huge growth.

Groupon expects gross profit to be in the range of $1.30 billion and $1.35 billion, an increase of $40 to $90 million compared to full year 2016 results for the 15 countries in our go-forward footprint on an FX-neutral basis.

Today we’ll be listening to the call to hear about how the integration of the two businesses is going, or if there was another motivation for this acquisition.

Updated with correction to earnings per share figure and comments from the CEO.

Featured Image: Scott Olson/Getty Images